Corporate social responsibility

Employees of a leasing firm taking time off their regular jobs to build a house for Habitat for Humanity, a non-profit that builds homes for needy families using volunteers

Corporate social responsibility (CSR) or corporate social impact is a form of international private business self-regulation[1] which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in, with, or supporting professional service volunteering through pro bono programs, community development, administering monetary grants to non-profit organizations for the public benefit, or to conduct ethically oriented business and investment practices.[2][3] While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy[4] similar to what is now known today as Environmental, Social, Governance (ESG); that time has passed as various companies have pledged to go beyond that or have been mandated or incentivized by governments to have a better impact on the surrounding community. In addition, national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation[5] for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "creating shared value", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits (see the detailed review article of Menghwar and Daood, 2021).[6]

Considered at the organisational level, CSR is generally understood as a strategic initiative that contributes to a brand's reputation.[7] As such, social responsibility initiatives must coherently align with and be integrated into a business model to be successful. With some models, a firm's implementation of CSR goes beyond compliance with regulatory requirements and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law".[8]

Furthermore, businesses may engage in CSR for strategic or ethical purposes. From a strategic perspective, CSR can contribute to firm profits, particularly if brands voluntarily self-report both the positive and negative outcomes of their endeavors.[9] In part, these benefits accrue by increasing positive public relations and high ethical standards to reduce business and legal risk by taking responsibility for corporate actions. CSR strategies encourage the company to make a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others.[10] From an ethical perspective, some businesses will adopt CSR policies and practices because of the ethical beliefs of senior management: for example, the CEO of outdoor-apparel company Patagonia, Inc. argues that harming the environment is ethically objectionable.[11]

Proponents argue that corporations increase long-term profits by operating with a CSR perspective, while critics argue that CSR distracts from businesses' economic role. A 2000 study compared existing econometric studies of the relationship between social and financial performance, concluding that the contradictory results of previous studies reporting positive, negative, and neutral financial impact were due to flawed empirical analysis and claimed when the study is properly specified, CSR has a neutral impact on financial outcomes.[12] Critics[13][14] have questioned the "lofty" and sometimes "unrealistic expectations" of CSR,[15] or observed that CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. In line with this critical perspective, political and sociological institutionalists became interested in CSR in the context of theories of globalization, neoliberalism, and late capitalism.

  1. ^ Cite error: The named reference Sheehy was invoked but never defined (see the help page).
  2. ^ Lee, Nancy; Kotler, Philip (2013). Corporate social responsibility doing the most good for your company and your cause. Hoboken, NJ: Wiley. ISBN 978-1118045770.
  3. ^ Liang, Hao; Renneboog, Luc (2016-12-06). "On the Foundations of Corporate Social Responsibility: On the Foundations of Corporate Social Responsibility". The Journal of Finance. 72 (2): 853–910. doi:10.1111/jofi.12487.
  4. ^ Dann, Jeremy (July 1, 2009). "Business Ethics Integral to Corporate Strategy, says Stanford's Malhotra". cbsnews.com. Archived from the original on March 18, 2017. Retrieved September 15, 2020. [BNET:] Ethics as central to overall corporate strategy—is that conventional wisdom or is that a new approach? [Professor:] I think a lot of students think, "Ethics is a constraint on profits". A lot of corporate social responsibility is taught as a part of marketing.
  5. ^ Sheehy, Benedict (2012). "Understanding CSR: An Empirical Study of Private Regulation" (PDF). Monash University Law Review. 38: 103–127.
  6. ^ Menghwar, Prem Sagar; Daood, Antonio (October 2021). "Creating shared value: A systematic review, synthesis and integrative perspective". International Journal of Management Reviews. 23 (4): 466–485. doi:10.1111/ijmr.12252. hdl:11385/206035. ISSN 1460-8545. S2CID 233641604.
  7. ^ Johnson, Zachary; Mao, H.; Lefebvre, S.; Ganesh, J. (2019). "Good Guys Can Finish First: How Brand Reputation Affects Extension Evaluations". Journal of Consumer Psychology. 29 (4): 565–583. doi:10.1002/jcpy.1109. S2CID 150973752.
  8. ^ McWilliams, Abagail; Siegel, Donald (2001). "Corporate social responsibility: A theory of the firm perspective". Academy of Management Review. 26 (1): 117–127. doi:10.5465/amr.2001.4011987.
  9. ^ Johnson, Zachary; Ashoori, Minoo; Lee, Yun (2018). "Self-Reporting CSR Activities: When Your Company Harms, Do You Self-Disclose?". Corporate Reputation Review. 21 (4): 153–164. doi:10.1057/s41299-018-0051-x. S2CID 170000354.
  10. ^ Farrington, Thomas; Curran, Ross; Gori, Keith; O'Gorman, Kevin D.; Queenan, C. Jane (2017). "Corporate social responsibility: reviewed, rated, revised". International Journal of Contemporary Hospitality Management. 29 (1): 30–47. doi:10.1108/IJCHM-05-2015-0236.
  11. ^ Paumgarten, Nick (2016-09-12). "Patagonia's Philosopher-King". The New Yorker. ISSN 0028-792X. Retrieved 2018-04-24.
  12. ^ McWilliams, Abagail; Siegel, Donald (6 April 2000). "Corporate social responsibility and financial performance: correlation or misspecification?". Strategic Management Journal. 21 (5): 603–609. doi:10.1002/(SICI)1097-0266(200005)21:5<603::AID-SMJ101>3.0.CO;2-3. JSTOR 3094143.
  13. ^ Beatty, Jeffrey F.; Samuelson, Susan S. (2009). Introduction to Business Law. Cengage Learning.
  14. ^ Rosenberg, Matthew J. (1 April 2002). "Review of Misguided Virtue: False Notions of Corporate Social Responsibility". International Affairs. Archived from the original on 2013-05-29. Retrieved 2013-04-26.
  15. ^ Henderson, David (2001). Misguided Virtue: False Notions of Corporate Social Responsibility. Institute of Economic Affairs. p. 171. ISBN 978-0-255-365109.