research paper on corporate social responsibility and sustainability

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• Published: 05 July 2016

Corporate social responsibility research: the importance of context

• Carol A. Tilt 1  

International Journal of Corporate Social Responsibility volume  1 , Article number:  2 ( 2016 ) Cite this article

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There has, in recent times, been an increasing interest in understanding corporate social (and environmental) responsibility (CSR) and, in particular, CSR reporting in developing countries. However, many of these studies fail to investigate fully the contextual factors that influence CSR and reporting in those countries, preferring to rely on theories and hypotheses developed from studies undertaken in the West, particularly the US, UK and Australasia.

It may be argued that this is appropriate as many emerging economies are experiencing growth and moving towards having a more market-based orientation. Notwithstanding this, a large number of these countries have an entirely different socio-political environment, with different political regimes, legal systems and cultural influences. These factors have a significant effect on the applicability of theories such as stakeholder theory, legitimacy theory and accountability theory, which are commonly used to explain the phenomenon of reporting.

In State Capitalist countries, such as China, an important influence on companies is the political ideology that underpins the nation’s government. The nature and impact of ideology and hegemony in China has been under-studied and, therefore, investigating how the ideology, and competing forces that may mitigate its influence, manifest themselves in Chinese reporting are essential. In the Middle East, countries such as Saudi Arabia have no free press, are ruled by a royal family, have a market dominated by the oil industry, and potential religious influences. Such socio-cultural differences mean societies develop different understandings of concepts such as sustainability and social responsibility. Finally, countries such as Sri Lanka have some similarities to other developing countries, but their economy is set against a background of a recent civil war – operating in a post-conflict economy is a factor rarely considered in social and environmental disclosure, yet has important influence on policy in these areas.

This paper discusses three contextual issues that warrant more and improved consideration in CSR research, with particular emphasis on CSR reporting research.

More and more corporations worldwide are involved in corporate social responsibility activities, and as a result are providing more social and environmental information to the public. Following from this, CSR disclosure, or reporting, has become one of the major fields of investigation by accounting scholars (Deegan 2009 ; Mathews 1997 ; Tilt 2001 ). Research that considers both CSR activity and CSR reporting has traditionally focused on companies in more developed economies, predominantly the US, UK, Australia and New Zealand (Burritt and Schaltegger 2010 ; Frost et al. 2005 ; Gray 2006 ; Gurvitsh and Sidorova 2012 ; Othman and Ameer 2009 ; Patten 2002 ; Sahay 2004 ), but recently there has been increasing interest in understanding the phenomenon in developing countries particularly as they experience growth and move towards a more capitalist orientation (Sumiani et al. 2007 ). Of the research that does exist, a number of papers suggest that ‘country’ is a determinant for CSR involvement and for the level of disclosure, but do not go much further.

Many of the studies of developing countries however, choose a framework for their investigation based on those shown to be meaningful for explaining disclosure in developed, capitalist economies. That is, they fail to investigate fully the contextual factors that influence firms and their reporting in those countries that have a different social, political, legal and/or cultural context.

It may be argued that this is appropriate as many emerging economies are experiencing growth and moving towards having a more market-based orientation. However, this is rarely acknowledged or questioned in these papers. Yet, it is reasonable to suggest that these factors have a significant effect on the applicability of theories such as stakeholder theory, legitimacy theory and accountability theory, which are commonly used to explain the phenomenon of reporting.

The majority of the world’s population lives in developing countries and each country experiences its own unique social, political and environmental issues (United Nations 2013 ). These countries are in the process of industrialisation and are often characterised by unstable governments, higher levels of unemployment, limited technological capacity, unequal distribution of income, unreliable water supplies and underutilised factors of production. As a result of rapid industrial development, policies are pursued that aim to attract greater foreign investment, and the investors are often keen to start benefitting from fiscal incentives and cheap labour. While these strategies make economic sense, they have adverse social and environmental effects, including the use of child labour, low or unpaid wages, unequal career opportunities, occupational health and safety concerns, and increased pollution.

In a review of the literature on determinants of CSR reporting (Morhardt 2010 ), reports that research on the impact of different variables in different regions is inconclusive due to the lack of enough studies. Factors that may influence CSR disclosure practices fall broadly into internal and external (Fifka 2013 ; Morhardt 2010 ), but are commonly classified further as (Adams 2002 : p224):

Corporate characteristics, such as size, industry group, financial/economic performance and share trading volume, price and risk;

General contextual factors, such as country of origin, time, specific events, media pressure, stakeholders and social, political, cultural and economic context; and

Internal contextual factors, including different aspects of corporate governance.

While CSR reporting has been studied by a large number of scholars, only a few fall into the second of the categories above, and consider context in detail. This is particularly relevant when considering developing countries. A few papers have specifically reviewed studies on developing countries. For example, (Belal and Momin 2009 ) categorise the work on developing countries into three groups: studies of the volume or extent of reporting; studies of the perceptions of CSR reporting by managers; and studies of the perception of CSR reporting by stakeholders. In all the studies reviewed there is little discussion of the context, other than a description of the country, and no real thought about the theoretical assumptions being made.

This paper presents a discussion of the different contextual issues or factors that show some evidence or potential to influence CSR and reporting in developing countries. It focusses on three specific issues and provides a research agenda for future consideration of the influence of context in CSR reporting research. The paper is structured as follows. The next section introduces some broad contextual factors that warrant consideration in the literature on CSR reporting. Next, three specific contextual issues are examined: the role of political ideology and hegemony; the influence of cultural understandings; and the impact of historical economic context. Finally, by way of conclusion, some recommended areas for further research are suggested.

Contextual considerations

Adams ( 2002 ) talks about the social, political, cultural and economic context, so some consideration of what this might mean is needed as each of these concepts themselves cover a variety of aspects, and indeed overlap. While papers may talk about the ‘social context’ in which the companies being examined operate, this is not well defined and little consideration is given to what this means. Some things that could be more explicitly considered include, inter alia : the role of the press; the status of women; the legal/justice system; the level of corruption; the level of government control, cultural understandings; and so on. This paper chooses to highlight three of these areas, and these are discussed briefly below in broad terms, followed by a discussion of some specific aspects of each identified as providing fertile grounds for future research.

Political system

Assumptions are often made about capitalist systems, whether explicit or implicit, as the vast majority of work on CSR reporting has been done in the Western context. However, there is little research looking at CSR reporting in socialist or communist countries. Some work has been undertaken on China (Dong et al. 2014 ; Gao 2011 ; Situ and Tilt 2012 ), but this work often applies the same conceptual frameworks as Western studies. What about the influence of ideology, and hegemony?

Sociocultural environment

Human beings have “distinctive cultural (learned) characteristics, histories and responses to their environment” and the term ‘sociocultural’ is commonly used in anthropological research to describe these and the “interactions and processes” that this involves (Garbarino 1983 : p1). Some general studies of culture and CSR using Hofstede exist (Silvia and Belen 2013 ), but an in-depth analysis of different understandings and conceptions of terms such as CSR as a result of sociocultural influences is lacking. The work that does examine specific factors often suggests that the Western concept of CSR does not fit these contexts (Wang and Juslin 2009 ).

The majority of work that considers sociocultural factors has looked mainly at religious aspects of CSR, most commonly by reviewing reporting by Islamic organisation, such as Islamic banks (Maali et al. 2006 ; Siwar and Hossain 2009 ; Sudarma et al. 2010 ). The teachings of many religions focus on social responsibility, the relationship with the natural environment, treatment of others, fairness, justice, etc., so there is a natural expectation that religion-based organisations may be more likely to engage in CSR and CSR reporting. A more nuanced consideration of how this manifests itself in different societies would improve understanding of the drivers and motivations of these activities. Similarly, other sociocultural factors, such as national identity, values, social organisation and language, could be incorporated.

Stage of development

The emerging literature on CSR reporting outside the Western world examines countries that are ‘developing’ (Belal and Momin 2009 ; Momin and Parker 2013 ), but little depth is included about where they are in their development journey and how the potential conflict between economic and social goals impacts CSR or CSR reporting. Rostow’s ( 1962 ) Stages of Economic Growth model suggests there are five stages (traditional society, preconditions for take-off, take-off, drive to maturity, and age of high or mass consumption), yet most literature on CSR classifies countries only into developed or developing. The ‘developing’ classification potentially includes countries that are in Rostow’s first, second or third stage which may have an impact on their response to CSR issues. In addition to economic variables however, the United Nations also produces a Human Development Index (HDI) which considers life expectancy, education and income to measure how social, as well as economic, development (UNDP 2015 ). Both these concepts are important for consideration of CSR.

Importantly, consideration of just one or two aspects of these three broader contextual issues may result in misinterpretation of the results. Often these things interact, for example, social issues often cross over with cultural and religious impacts, or even with political influence where the regime is more hegemonic. It is thus important to consider, or at least acknowledge, the holistic nature of the context of the phenomenon being examined.

It is beyond the scope of this paper to discuss all of the issues raised here although this would be an important part of a larger research program. Therefore, three particular contextual issues, and three specific contexts, are the focus of this paper: the role of political ideology and hegemony (China); the influence of cultural understandings (Middle East); and the impact of historical economic context (Sri Lanka).

Politics, ideology and state control

Ideology is a set of common beliefs that are shared by a group of people, and is “the fundamental social beliefs that organize and control the social representations of groups and their members” (Van Dijk 2009 : p78). Countries such as China provide a fertile research setting to examine the influence of ideology, and hegemonic approaches of influencing CSR, which have been missing from most CSR research in the region.

The Chinese political model has some unique characteristics. Among these is the dominance of ‘the party state’, which exercises control in different forms over most aspects of the economy that is unmatched when compared to other state capitalist economies. Political leaders use a variety of tools (Bremmer 2010 ) and it is the combination of three particular tools that sets apart the Chinese system: the exercise of control as a dominant shareholder, the ability to appoint key positions in major firms, and the means to influence decision-making via ideology. First, the party exerts shareholder power over state-owned enterprises (SOEs). Chinese SOEs play an instrumental role in society (Du and Wang 2013 ) and make up around 80 % of the stock market (Economist T 2012 ). As protecting the environment is a major part of the guiding ideology and the nation’s policy, SOEs are likely to be keen to provide CER. Second, the party exercises power over the appointment of the senior leadership in SOEs (Landry 2008 ). This has resulted in control as they are “cadres first and company men second. They care more about pleasing their party bosses than about the global market” (Economist T 2012 : p6). Third, party control is exercised through ideology. The party has cells in most larger firms, whether private or state-owned, which influence business decisions made at board meetings. Given that China considers the Marxist-Leninist-Maoist ideology as crucial this distinguishes it most significantly from other varieties of state capitalism that have a more liberal-democratic flavour.

There is some evidence that the first form of party control has been declining in recent times with the number of SOEs under the SASAC’s control halving over the last decade (Mattlin 2009 ). Similarly, since 1999, the share of SOEs in the economy has declined from 37 % to less than 5 %. This results in greater use of regulation and ideological hegemony to achieve its aims, yet most CSR research still uses state-ownership as a proxy for all types of state control.

Even after economic reform, ideology in China was still pervasive (Lieber 2013 ). Lieber ( 2013 ) argues that ideology is widely used to signal loyalty and the government is good at using ideology to “control and direct key vocabularies… (and) vague ideological language can create a climate of uncertainty thus increasing the range of a control regime” (Lieber 2013 : p346). However, the prevailing ideological themes in China are dynamic. In particular, most recently, new ideological themes have developed to respond to the changes in society. When economic reform began, “building up a socialist market economy with specific Chinese characteristics” was the guiding ideology (Zhang 2012 : p25). As such, economic growth was the country’s priority, but in 2005, “building up a harmonious society became the prevailing ideology” (and CSR is a key element of this resolution).

Ideology is used by the Chinese government to exert control over businesses. Traditionally, the government has “been considered a source of moral authority, official legitimacy and political stability…and …political language has been vested with an intrinsic instrumental value: its control represents the most suitable and effective way first to codify, and then widely convey, the orthodox state ideology” (Marinellin 2012 : p26). The language “developed and used by party officials … consists of ‘correct’ formulation, aims to teach the ‘enlarged masses’ how to speak and, how to think” (Marinellin 2012 : p26). The idea of the importance of a ‘Harmonious Society’ is the “re-contextualized discourse in response to the emergent issues in the changing social stratification order” (Zhang 2012 : p33). As a result, Chinese companies have been noticeably adopting the language of social concern and environmental protection.

It may therefore be suggested that CSR reporting in China is directly a response to the government’s ideological hegemony. However, the story is not as straightforward as it may first appear, for two reasons. First, despite a great deal of commitment to social and environmental regulation in China, implementation of these regulations has been limited. Second, as China enters a phase of continued economic development, Western influences may begin to have a moderating effect on the strength of the ideology.

The Chinese economy has grown rapidly in terms of gross domestic product (GDP) (World Bank 2016 ). The economic reforms that took place over the past decades were motivated substantially by the Chinese central government, and recent scholars have noted the positive role that ideology played in driving those reforms, notwithstanding that economists historically view ideology as “distorting… knowledge, judgment and decision making” (Lieber 2013 : p344).

With economic reform however, has come substantial environmental degradation which in turn has led to poor health outcomes for much of society generally. This led to a high level of commitment to environmental regulation in particular from as early as the 1990, followed by the release of even more rigorous regulations on environmental protection in the 2000s. However, despite the high commitment made by the Chinese central government, implementation of these policies is quite poor (Bina 2010 ). In terms of environmental regulation, for example, the implementation problems stem from a number of areas, including: the position of environmental protection agencies in the political framework; conflict between central and local governments; and supervision issues. The system of supervision of local environmental departments is a key problem (Bina 2010 ). When an environmental department is set up in the central government, corresponding environmental departments are set up in local governments. Ideally, these local departments should be agencies of the central department, deliver the central environmental department’s strategies, and supervise local environmental protection implementation. In reality, the local environmental departments are subservient to the local rather than central governments. All their financial support and staff appointments come from local governments. Therefore, rather than supervising local environmental protection implementation, the local environmental departments become “rubber stamps” for local governments (Zheng 2010 ). Therefore, it is unlikely that there will be efficient enforcement of environmental laws, regulations and policies at the local level (Bina 2010 ; Zheng 2010 ).

Finally, as China heads towards a market economy, government intervention becomes a policy choice, and markets function as a tool of national interest (Zhao 2011 ). However, as Chinese firms become more involved with foreign trading partners and markets, their reporting activity is also influenced by foreign and global organisations, leading to potential tension between demonstrating commitment to state ideological goals and meeting the requirements of global stakeholders.

Given the complexity of the context, research into CSR reporting in China needs to take into account the specific aspects of Chinese politics and culture in order to provide a nuanced understanding, and ultimately an improvement, of CSR reporting activities. However, a review done of the literature on CSR in by Chinese showed that it is very descriptive with little depth and much of the CSR literature is conceptual, descriptive, or argumentative in nature (Guan and Noronha 2013 ). The authors noted proper research methodologies are not systematically applied in some studies, and supporting theories are lacking. In the non-Chinese studies on China, there is also a predominance of papers on determinants and volume of reporting (Situ and Tilt 2012 ), with very few considering broader contextual factors, other than a few that look at specific cultural attributes (e.g., Rowe & Guthrie 2009 ).

Sociocultural understandings

Notwithstanding a move towards a market orientation of many developing countries, such as in China as outlined above, conceptions of CSR by management of companies in these countries may be quite different to those in the West (Wang and Juslin 2009 ). These differing conceptions may be a result of differing values and attitudes, language, religion or identity. Even specific elements of CSR are conceived of differently, for example in China, the main understanding of sustainability is in terms of environmental protection (Situ et al. 2013 , 2015 ). These socioculturally derived understandings are inevitably reflected in their reporting.

In another example, in the Middle East, the predominant perception of CSR is that it simply means philanthropic donations. In this region, the issue of social responsibility is relatively new, and as such the number of studies of CSR and CSR reporting in the Gulf region is growing (Al-Khatar and Naser 2003 ; AlNaimi et al. 2012 ; Emtairah et al. 2009 ; Mandurah et al. 2012 ; Marios and Tor 2007 ; Minnee et al. 2013 ; Nalband and Al-Amri 2013 ; Naser et al. 2006 ; Naser and Hassan 2013 ; Qasim et al. 2011 ; Sangeetha and Pria 2012 ). Many of these studies do not consider the cultural context to a very great extent as the research is emerging and focusses on perceptions. For example, Mandurah et al. ( 2012 ) and Emtairah et al. ( 2009 ) explored managerial perceptions of the concept of CSR in Saudi Arabia and found that managers are aware of the concept, but there is little connection between the managerial level perceptions and firms’ workforce. The authors describe CSR as being in its infancy phase, which limits the understanding of the concept to the view that CSR simply means being philanthropic. This indicates a different, and perhaps less developed, understanding of the concept in the region compared with the West, but the reasons for this, and the consequences for CSR reporting, are under-explored. Some authors suggest the narrow use of the term is because of the religious obligations towards society, (Visser 2008 ). There is only minimal evidence of any CSR practices other than philanthropy-based or any strategic approaches to CSR for long-term benefits (Visser 2008 ), but the trend is increasing and the forms that philanthropy takes is expanding.

It has also been argued that politics plays a significant role in increasing the awareness of CSR in the Arab world. Avina ( 2013 ) suggests that the perception of CSR in the Middle East changed after the Arab spring event, for both local and international firms. The term CSR more than a decade ago had little meaning to the public (Visser 2008 ) but since the Arab spring, the sense of social responsibility among civil society and the corporate sector has increased Avina 2013 ). Firms realised that they play a role in social responsibility, not just governments, and recognised that CSR should go beyond just donations to charitable causes (Avina 2013 ). Ronnegard ( 2013 ), however, predicts that CSR in the Middle East will not mimic the Western concept because of the strong influence of culture and religion in the region. Moreover, the influence of stakeholders in the Middle East is considered to be limited due to there being a lack of free press, few lobby groups and the different cultural attributes of employees and consumers. Some studies in Gulf countries have however, suggested that stakeholders, such as government and charitable organisations, may have an impact on firms’ behaviour (Emtairah et al. 2009 ; Naser et al. 2006 ). Others suggest that CSR may have developed as a concept due to the increase of foreign direct investment into Arab countries, the trend of shifting family and government owned firms into the public domain, and the globalisation of the region’s large national firms.

From the limited studies that have been undertaken, there is evidence of CSR reporting by Gulf country companies, with human resources and community involvement being the dominant themes in may reports Abu-Baker and Naser 2000 ). Thus, understanding of motivations for CSR reporting is not yet well developed and few existing studies consider the different level of stakeholder pressure in the region. This suggests that more research is needed on the formation of notions of CSR within specific contexts. This region is of particular interest because, according to the Human Development Report (HDI 2013 ), countries in the region are classified as high, or very high, in human development. That is, they are not only trying to develop and improve their economy, but are also trying to improve the quality of life of their citizens (Ramady 2010 ). The overall outlook of these countries indicates that they are performing well, however, Fadaak ( 2010 ) notes that identifying poverty lines is a challenge because of a lack of a clear definition of poverty in the region. There are no official reports considering poverty or other social problems and no GCC (Gulf Cooperation Council) countries were found in the list of the World Bank Database in relation to the poverty rate.

Similarly, in other developing countries the importance of local economic, cultural, and religious factors that shape the business environment, and understandings of charity and philanthropy, need to be taken into account. Empirical work in this area is lacking (Lund-Thomsen et al. 2016 ). In Sri Lanka, for example, “the most common arguments used to ‘sell’ the business case for CSR and CP [Corporate Philanthropy], for example an improved brand image, increased market or customer share, employee retention, mitigated regulatory risks, and reduced tax burden, are considered mostly irrelevant” (Global Insights 2013 : p1). Business leaders engage in CSR for a range of business, humanitarian, social, religious, and political reasons. Key amongst them is a belief that ‘giving back’ to society discharges religious obligations to the poor, and an awareness that being seen to contribute to national development goals is important (Global Insights 2013 ). Hence, the conception of CSR in this region is culturally determined, but also shaped by the economic environment.

• Economic development

As well as government control, culture and political factors, the stage of economic development a country is in is also an important contextual factor that may impact CSR reporting. In China, as discussed above, the drive for economic reform led directly to environmental impacts which needed to be addressed. A number of other developing countries have been examined for their reporting on CSR issues, particularly from the Asian region (Andrew et al. 1989 ; Elijido-Ten et al. 2010 ), India (Mishra and Suar 2010 ; Raman 2006 ; Sahay 2004 ), and Bangladesh (Belal and Owen 2007 ; Belal and Roberts 2010 ; Khan 2010 ; Muttakin et al. 2015 ).

While these countries are classified as developing (IMF 2015 ), Bangladesh and India score only medium for human development. Another country in the region, Sri Lanka, has a high rating on the HDI, and has been exhibiting extensive growth since the end of a 30-year war (WPR 2015 ). Thus, exhibiting both economic and social growth aspects makes it an interesting case for studying CSR.

Sri Lanka has a population of over 20 million and foreign companies have increased their investments with one billion US dollars in direct foreign investments in 2013 alone ( BOI ). Classified as a middle income developing country, the challenge for Sri Lanka is to achieve high economic growth without causing irreversible damage to the environment and while continuing to eliminating social issues such as poverty, malnutrition and poor workplace ethics (Goger 2013 ). In addition, Sri Lanka also has a long history of corporate philanthropy, largely led by individuals whose values and actions stem from religious and cultural views (Beddewela and Herzig 2013 ) but has recently seen an increase in private firms offering development-related initiatives. Public infrastructure projects have been the main element of post-war economic planning, but there still remains rural poverty in the country. Thus, the primary motivation for CSR and philanthropy in Sri Lanka is poverty reduction, particularly for children and youth, social welfare organisations like orphanages and elderly homes, hospitals and health services, and veterans’ charities (Global Insights 2013 ). Thus, the economic, cultural, and political context means that these poverty rates have fallen (data indicates that the rate went from approximately 20 % in 2000 to under 9 % in 2013) and that inflation has slowed (Wijesinha 2014 ), so opportunities for private businesses to contribute to infrastructure abound. However, these private, development-orientated, CSR initiatives have often failed to deliver their aims and there is considered to be a danger that they may in fact perpetuate the causes of poverty and ethnic and religious conflict given their ties to particular ethnic groups (Global Insights 2013 ).

Notwithstanding this environment, the topic of CSR reporting in Sri Lanka has received relatively little research attention compared to other parts of the world (see Belal and Momin 2009 , for a review). In terms of motivations for CSR, there is some evidence that firms in which senior management have a positive outlook towards social and environmental practices tend to disclose more on these aspects, as compared to other firms (Fernando and Pandey 2012 ). However, reporting on CSR initiatives is not mandatory thus it is likely that any voluntary reporting by Sri Lankan firms will vary significantly. One study of reporting was conducted by Senaratne and Liyanagedara ( 2012 ) who examined the level of compliance with Global Reporting Initiative (GRI) guidelines in the disclosures of publicly listed companies, selected from seven business sectors. The authors conclude that the level of compliance with the GRI is low and that disclosures vary significantly amongst the companies, potentially reflecting varying commitment to CSR. Similarly, a longitudinal study across five years (2005–2010) was carried out by Wijesinghe ( 2012 ) to identify trends in CSR reporting in Sri Lanka and the study identified an increasingly positive trend, predicting similar levels of disclosures provided by companies in developed countries. The few studies that have been conducted examining the predominance of reporting in Sri Lanka, mostly examining multinational companies, conclude that CSR reporting is gaining momentum in Sri Lanka but is still emerging as the concept of CSR itself emerges (Beddewela and Herzig 2012 ; Hunter and Van Wassenhove 2011 ).

Conclusion and a future research agenda

As more and more research on CSR in developing countries emerges in the academic literature, it is important to ensure that appropriate consideration is given to the context in which the research takes place. Examination of CSR and CSR reporting practices without contextualisation could perpetuate flawed understandings that are based on evidence from research in the developed world. Different political, social, cultural and economic environments impact on the both the development of, and reporting of, CSR activities and consequently impact on the value of these activities to benefit society and the natural environment.

A suggested agenda for future research, that considers context in more depth, includes:

Consideration of ideological and hegemonic regimes and their attitude towards CSR. This research would consider potential positive and negative impacts of the political and governance system. In China, for example, the potential for Communist Party ideology to increase environmental protection and improve social conditions is vast, and is starting to be seen to have a strong impact on firm behaviour. Examination of this over time will provide an important contribution to understanding the role of government beyond the more common analysis of environmental protection regulation.

Greater examination of sociocultural variables in different countries, beyond analysis of religious influence, and beyond the use of Hofstede. Understandings of concepts such as CSR in countries in Asia, the Middle East and the Asian sub-continent, are known to differ from those in the West, so understanding their potential to lead to better (worse) CSR outcomes is important. The variety of variables that could be included is vast, but some clearly important issues include: language, secularism, freedom of the press, access to information, homogeneity of values and attitudes, and the existence of a national figurehead or identity.

Longitudinal examination of the process of economic development. Countries where the economy is developing rapidly, such as China and the Middle East; and countries where the historical economic context differs dramatically, such as in Sri Lanka where the need for development is borne out of conflict, provide rich backgrounds to consider how CSR is developing alongside economic developments.

A comprehensive framework for examining these, and other, potential factors that influence CSR and CSR reporting in developing countries does not exist, but Table  1 attempts to provide a preliminary outline of some factors that could comprise such a framework, and be used to guide future research. As mentioned earlier, it is important to note, however, that these variables are not discreet and are likely to interact with each other. This is noted in the table as a reminder that the classifications are somewhat artificial and that acknowledgement of a more holistic consideration is important.

These are clearly only a selection of opportunities for CSR research on developing nations and emerging economies. Calls for more work on these factors have continued since Adams’ ( 2002 ) original call, but there is still vast scope to improve our understanding of CSR practice throughout the world (Fifka 2013 ), where much of the social and environmental damage is taking place.

Importantly, research of this kind must be transdisciplinary as perspectives from areas such as political science, philosophy and economics are essential. Only with in-depth, contextualised understandings can improvements to the nature of CSR activity be implemented.

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Acknowledgements

It is important to acknowledge that this paper provides an overview of a larger research program currently being undertaken by a team of doctoral students at Flinders University and the University of South Australia. Credit must be given to Ms Hui Situ (Flinders University) who is researching environmental reporting in China, Mr Abdullah Silawi (Flinders University) who is researching social responsibility reporting in the Gulf region, and Ms Dinithi Dissanayake (University of SA), who is researching environmental disclosure in Sri Lanka.

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Corporate Social Responsibility and the Sustainable Development Goals (SDGs)

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Corporate accountability ; Corporate citizenship ; Corporate responsibility ; Corporate social performance ; Corporate social responsiveness ; Corporate stakeholder responsibility ; Corporate sustainability responsibility ; Corporate sustainability ; Enterprise social responsibility ; Global governance ; Responsible business conduct ; Sustainable business ; Triple bottom line

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Corporate Social Responsibility is the voluntary act of companies to integrate social and environmental interests into their business approaches, to contribute to sustainable development and to be accountable for their impact on the environment and society.

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The problematic nature of defining corporate social responsibility.

Although not all the synonyms in the list mean exactly the same thing, they already show the diversity associated with Corporate Social Responsibility (CSR). Defining CSR is not an easy task because most agree that there is no single...

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Molderez, I. (2020). Corporate Social Responsibility and the Sustainable Development Goals (SDGs). In: Leal Filho, W., Azul, A., Brandli, L., Özuyar, P., Wall, T. (eds) Decent Work and Economic Growth. Encyclopedia of the UN Sustainable Development Goals. Springer, Cham. https://doi.org/10.1007/978-3-319-71058-7_7-1

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Corporate sustainability and responsibility: creating value for business, society and the environment

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Asian Journal of Sustainability and Social Responsibility volume  2 ,  pages 59–74 ( 2017 ) Cite this article

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Today’s corporations are increasingly implementing responsible behaviours as they pursue profit-making activities. A thorosugh literature review suggests that there is a link between corporate social responsibility (CSR) or corporate social performance (CSP) and financial performance. In addition, there are relevant theoretical underpinnings and empirical studies that have often used other concepts, including corporate citizenship, stakeholder management and business ethics. In this light, this contribution reports on how CSR is continuously evolving to reflect contemporary societal realities. At the same time, it critically analyses some of the latest value-based CSR constructs. This review paper puts forward a conceptual framework for corporate sustainability and responsibility. It suggests that responsible business practices create economic and societal value by re-aligning their corporate objectives with stakeholder management and environmental responsibility.

This research builds on the previous theoretical underpinnings of the corporate social responsibility (CSR) agenda, including corporate social performance (Waddock and Graves 1997 , Griffin and Mahon 1997 , Wang and Choi 2013 ), stakeholder management (Freeman 1984 , Berman et al. 1999 , Carroll and Buchholtz 2014 ), corporate citizenship (Carroll 1998 , Maignan et al. 1999 , Fombrun et al. 2000 , Matten and Crane 2005 ), strategic CSR (Burke and Logsdon 1996 , Lantos 2001 , McWilliams et al. 2006 , Falck and Heblich 2007 ) and creating shared value (Camilleri 2017 , Porter and Kramer 2011 , 2014 , European Union 2011 , Elkington 2012 , Crane et al. 2014 ). Moreover, it reviews the corporate sustainability and responsibility perspectives (Van Marrewijk and Werre 2003 , Salzmann et al. 2005 , Montiel 2008 , Visser 2011 , Benn et al. 2014 ). Corporate sustainability and responsibility is increasingly being recognised as a concept that offers ways of thinking and behaving. This approach toward sustainable business has potential to deliver significant benefits to business, society and the environment.

The subject of corporate social responsibility (CSR) has continuously been challenged by those who want corporations to move beyond transparency, ethical behaviour and stakeholder engagement. Today, responsible behaviours are increasingly being embedded into new sustainable business models that are designed to meet environmental, societal and governance deficits. Although there are numerous theories and empirical analyses on CSR constructs (Carroll 1979 , Margolis and Walsh 2001 , McWilliams and Siegel 2001 , Fombrun 2005 , Wang and Choi 2013 , Strand et al. 2015 ), there is still scant theoretical research that links corporate sustainability with corporate social responsibility and environmental management. Therefore, this contribution aims at filling this academic gap by examining the conceptual developments of the “corporate sustainability and responsibility” notion. This review paper reiterates that that there is a business case for CSR as organizations can pursue profit-making activities (i.e. corporate sustainability). Businesses are encouraged to strategically re-align their products, services, and operations with responsible behaviors (Husted and Allen 2009 ). Strategic CSR outcomes may include responsible management of internal practices and forging relationships with external stakeholders. It is in the organizations’ interest to forge closer ties with the regulatory authorities and with their neighbouring communities. Responsible behaviours add value to the firm, society and the environment (Camilleri 2017 ). Therefore, businesses ought to utilize their skills, resources, and management capability that lead to social progress (see Beschorner 2014 , Porter and Kramer 2011 : 77). This is consistent with the expectation that much of CSR is developed in order to improve the firm’s image and reputation, possibly allowing it to differentiate its products in the market (Fombrun 2005 ).

The underlying objective of this research is to advance the corporate sustainability and responsibility concept. Hence, this contribution provides a critical analysis of the literature that has inevitably led to the conceptual development of this value-based construct. This research elaborates on the business case for CSR and the related stakeholder theory. It provides a logical link between them. Following relevant theoretical underpinnings, this review article also puts forward a conceptual model representing a graphical illustration of ‘corporate sustainability and responsibility’.

Literature review

• Corporate social responsibility

The discussion on social responsibility grew in popularity and took shape during the 60s. Many authors have indicated that the CSR notion was a fertile ground for theory development and empirical analysis (McWilliams et al. 2006 ). However, the businesses’ way of thinking has changed dramatically since Levitt in 1958 (and Friedman in 1962) held that the companies’ only responsibility was to maximise their owners’ and shareholders’ wealth, rather than looking after societal (and environmental protection) issues. At the time, these corporations had considerable bargaining power, and their power called for responsibility (Davis 1960 ). Arguably, these businesses had responsibilities towards society beyond their economic and legal duties. In the 60s and 70s, the most important social movements included civil rights, women’s rights, consumers’ rights as well as environmental movements. The period was characterised as an issue era, where companies began noticing specific societal problems arising from social, environmental and community issues. There was a focus on philanthropy and a noticeable manifestation in charitable donations. The gifts in-kind have expanded to the groups representing the health and social services, culture, arts, and the community at large. In a book entitled, ‘Corporate Social Responsibilities’, Walton ( 1967 ) addressed many facets of CSR in society. He came up with several models for social responsibility as he underlined that CSR involved a degree of voluntarism, as opposed to coercion. Moreover, back then, the corporations were incurring discretionary costs for their CSR engagement (Walton 1967 ). Without doubt, the clarification of CSR’s meaning is a significant strand within the research agenda. Table  1 reports a list of concepts that have emerged from the CSR paradigm:

The CSR notion has developed as a rather vague concept of moral good or normative behaviour (Carroll 1991 ). This construct was described as a relativistic measure of ‘the economic, legal, ethical and discretionary expectations that society had of organizations at a given point of time’ (Carroll 1979 ). CSR tackled ‘social problem(s)’ to engender positive ‘economic benefit(s)’ to ensure ‘well paid jobs, and ... wealth’ (Drucker 1984 ). This was consistent with academia’s call toward corporate social performance (CSP). The CSP theory had evolved from previous theoretical approaches. CSP reconciled the importance of both corporate social responsibility and corporate social responsiveness (Carroll 1979 ). It also placed an emphasis on achieving better performance out of the socially-responsible initiatives. Many researchers have used the corporate social performance (CSP) construct to establish a definitive causal relationship between the firms that were doing good (CSP) and those doing well (Corporate Financial Performance, i.e. CFP) (Waddock and Graves 1997 , Orlitzky et al. 2003 , Margolis and Walsh 2001 ).

There were several unresolved theoretical debates about whether there was a clear link between CSP and financial performance. Despite certain controversies regarding the validity of some empirical findings, most studies have reported a positive relationship between the two (Waddock and Graves 1997 , Preston and O'bannon 1997 ). The working assumption of CSP research was that corporate social and financial performance were universally related. Yet, it may prove hard for businesses and academia to demonstrate how CSR could lead to tangible improvements in the firms’ bottom lines.

It may appear that there was no explicit statement that describes how socially responsible practices could possibly translate into specific results that affect the profit and loss account (Murillo and Lozano 2006 ). At times, the empirical research did not yield the desired results as the findings were mixed (McWilliams and Siegel 2001 ). Alternatively, they yielded inconsistent evidence (Vogel 2005 ). Some authors have argued that the CSP-CFP link was pointless, as they were unable to find a positive relationship between the responsible business and the firms’ performance. Alternatively, another pertinent research question was to determine whether corporate profitability could be a sufficient motive for the avoidance of irresponsible behaviours (Vogel 2005 ).

The business case for corporate social responsibility

CSR can be much more than a cost, a constraint, or a charitable deed. It is ‘a source of opportunity, innovation and competitive advantage’ (Porter and Kramer 2006 ). However, its successful implementation could be influenced by a variety of factors including the firm’s size, diversification, research and development and market conditions (McWilliams and Siegel 2001 ). Very often academic research tried to follow and capture trends in the broader societal debate on the businesses’ social responsibilities. For instance, CSR’s domains often include, commercial responsibility, ethical responsibility and social responsibility (Singh and Del Bosque 2008 ). One of the businesses’ commercial responsibilities is their continuous development of high quality products or services. Companies are also expected to be fair and truthful in their marketing communications, whist they promote their offerings to customers (Singh and Del Bosque 2008 ). Secondly, the ethical responsibility is concerned with the corporations fulfilling their obligations towards their shareholders, suppliers, distributors and other agents with whom they make their dealings. Their ethical responsibility includes safeguarding the human rights and the norms that are (not necessarily) defined in the law when carrying out business activities. The ethical principles in business relationships could have more priority over achieving superior economic performance for some responsible corporations (Singh and Del Bosque 2008 ). Hence, the other social responsibility domain focuses on philanthropic behaviours. In this case, businesses could allocate part of their budget to the natural environment, or toward social issues that favour the most vulnerable in society. This form of social responsibility supports the development of financing stewardship principles including corporate donations to charitable institutions, religious, sports, cultural and heritage activities. This latter perspective is concerned with improving societal well-being.

Other scholars examined innovation and the level of differentiation in the industry as moderators in the relationship between corporate social performance and financial performance (Hull and Rothenberg 2008 ). A study reported that corporate social performance strongly affected financial performance in low-innovation firms and in industries with little differentiation (Hull and Rothenberg 2008 ). Ideally, social performance ought to be consistent over time and across stakeholder domains (Waddock and Graves 1997 , Johnson and Greening 1999 ). For example, job seekers are attracted by CSP and organizational ethics that mirror their own values (Turban and Greening 1997 , Jones et al. 2014 ). Hence, there is an opportunity that socially-responsible businesses could differentiate themselves from other companies. They may leverage their firm’s image relative to other organizations. Lozano ( 2015 ) held that external drivers for CSR include reputation, customer demands and their expectations, as well as regulation and legislation. His findings suggest that one of the CSP outcomes is to communicate the corporations’ commitment to socially-responsible and sustainability values that stakeholders share.

CSR can help to build reputational benefits, it enhances the firms’ image among external stakeholders and could lead to a favourable climate of trust and cooperation within the company (Camilleri 2014 ). The expenditures on CSR activities are typically intended as long- term investments that are likely to yield financial returns. Corporations “give back” to their constituencies because they believe it to be in their best financial interests to do so. Many authors held that CSR is a driver for innovation and economic growth. They believed that it will help the company to achieve a competitive advantage (Burke and Logsdon 1996 , Lantos 2001 , Sen et al. 2006 ) by deriving positive benefits for both societal stakeholders and for the responsible firms. Therefore, companies should devote their attention to CSR strategies which add value to the business and disregard others’ activities which do not add value to the business (Camilleri 2017 ). In this context, the corporate philanthropy should be deeply rooted in the firm’s competences and linked to its business environment (Porter and Kramer 2002 ). Thus, strategic CSR behaviours may lead to the creation of value for both business and society (Burke and Logsdon 1996 , Lantos 2001 , McWilliams et al. 2006 , Porter and Kramer 2011 ). Strategic CSR could increase the financial performance of businesses, it minimises their costs through better operational efficiencies, boosts the employee morale, creates job satisfaction and reduces the staff turnover, along with other benefits (Camilleri 2017 ).

• Strategic CSR

CSR can bring a competitive advantage if there are appropriate relationships with multiple stakeholders. Therefore, it is in the interest of business to engage in ongoing communications and dialogue with employees, customers, marketplace and societal groups (Morsing and Schultz 2006 , Union 2016 , Bhattacharya et al. 2009 ). Businesses may also need to recognise the potential of building fruitful networks with key marketplace stakeholders, including suppliers, regulatory authorities and the community at large. These stakeholder relationships are needed to bring external knowledge sources, which may in turn enhance organizational skills and performance. Acquiring new knowledge must be accompanied by mechanisms for dissemination. Arguably, there is scope in sharing best practices, even with rival firms. It is necessary for the responsible businesses to realise that they need to work in tandem with other organizations to move the CSR agenda forward.

In the past, the stakeholder theory has demonstrated how businesses could develop long-term mutual relationships, with a wide array of stakeholders. The businesses’ closer interactions with stakeholders could be based on relational and process-oriented views (Godfrey 2005 ). Thus, many firms are already forging strategic alliances in their value chain to run their businesses profitably. Many multinational corporations including Nestlé, Google, IBM, Intel, Johnson & Johnson, Unilever, and Wal-Mart have embraced the ‘shared value’ approach (Porter and Kramer 2011 , Union 2011 , Camilleri 2017 ). In many cases, they are building partnership and collaborative agreements with external stakeholders (including suppliers) hailing from different markets. The most successful businesses are increasingly promoting the right conditions of employment within their supply chains. They are instrumental in improving the lives of their suppliers (Porter and Kramer 2011 ). They do this as they would like to enhance the quality and attributes of their products, which are ultimately delivered to customers and consumers. They have economic responsibilities toward their owners and shareholders (Godfrey et al. 2009 , Desai and Dharmapala 2009 ). Many businesses do not always pay their fair share of taxes to government. Alternatively, they may be accused of not providing the right conditions of employment, or they may even pay lousy wages to their employees (Trejo 1997 ).

Some commentators on the subject of CSR often suggested that the factors that should contribute towards creating value in business and society are often qualitative in nature, and that there are variables that may prove very difficult to measure and quantify, such as, employee morale, corporate image, reputation, public relations, goodwill, and popular opinion (Maignan et al. 1999 , Fombrun et al. 2000 ). Therefore, any discretionary expenditure on altruistic or strategic CSR activities may be regarded as long-term investments that are likely to yield financial returns (McWilliams et al. 2006 , Falck and Heblich 2007 ). Hence, corporate philanthropy, stewardship and cause-related marketing could be re-aligned with the businesses’ profit motives (Camilleri 2017 ). This perspective resonates very well with the agency theory (Eisenhardt 1989 ). In the past, scholars argued that the companies’ only responsibility was to maximise their owners’ and shareholders’ wealth (Levitt 1958 , Friedman 1970 ). Hence, companies were often encouraged to undertake CSR strategies which add value to their business and to disregard other activities which were fruitless. Moreover, at times, the fulfilment of philanthropic responsibilities could simultaneously benefit the bottom line (Lantos 2002 ). Although, it could be difficult to quantify the returns of responsible behaviours, relevant research has shown that those companies that practiced social and environmental responsibility did well by doing good, in the long run (Falck and Heblich 2007 , Porter and Kramer 2011 ). However, other research has shown that it was also possible to overspend on CSR activities (Camilleri 2017 , McWilliams and Siegel 2001 , Lantos 2001 ).

The corporate social responsibility, environmental and ethical behaviours could be triggered by genuine altruism and self-preservation (Hemingway and Maclagan 2004 , Van Marrewijk 2003 ). Some of the contributions on this topic suggest that corporate philanthropy should be deeply rooted in the firms’ competences and linked to their business environment (Porter and Kramer 2002 , Godfrey 2005 ). Many authors often referred to CSR’s core domains (economic, legal and ethical responsibilities) that were compatible and consistent with the relentless call for the business case of CSR (Carroll and Shabana 2010 , Vogel 2005 ). The ethical responsibilities demand that businesses ought to abide by moral rules that define appropriate behaviours within a particular society. Another category of corporate responsibility is related to discretionary, voluntary or philanthropic issues. Corporate philanthropy is a direct contribution by a corporation to a charity or cause, most often in the form of cash grants, donations and/or in-kind services (Kotler and Lee 2008 ). This category of social responsibility is totally dictated at the “discretion” of the organization as there are no laws or codified expectations that guide the corporations’ activities (Rasche et al. 2013 ).

Discretionary responsibilities include those business activities that are not mandated by law, and they are not expected from businesses in an ethical sense (Carroll 1979 ). Practically, some examples where organizations meet their discretionary responsibilities include, when they provide day-care centres for working mothers, by committing themselves to philanthropic donations, or by creating pleasant work place aesthetics (Carroll 1979 ). Evidently, the CSR approach had established a new way of doing business that has led to the creation of value (Porter and Kramer 2011 , Union 2011 , Wheeler et al. 2003 ) with a respectful and proactive attitude towards stakeholders (Freeman 1984 , Lantos 2001 ). The stakeholder theory provides opportunities to align business practices with societal expectations and sustainable environmental needs. The stakeholder relationships support the principle of inclusivity, as the business practitioners ought to strike a balance between the conflicting demands of different stakeholders. Inevitably, businesses need to reconcile disparate stakeholders’ wants and needs (e.g. employees, customers, investors, government, suppliers et cetera).

The CSR’s responsibilities include the obligations toward customers. The businesses maintain economic growth, and meet the consumption requirements in the market. This economic component of CSR represents the fundamental responsibility of businesses. Many firms produce goods and services and sell them at fair prices to customers (including other businesses). This will in turn allow them to make a legitimate profit and to pursue growth and competitiveness. The legal responsibilities of businesses imply that these entities must fulfil their economic mission within the extant framework of rules and regulatory parameters. This legal component recognises the firms’ obligations to obey the relevant laws in the countries where they are trading. Of course, it could prove hard to define and interpret the ethical responsibilities of businesses. This component is often referred to as a “grey area”, as it involves activities that are not necessarily mandated by law but may still entail certain organizational behaviours that are expected by society (Carroll 1979 ).

The economic, legal and ethical responsibilities of corporations are compatible with the business case for CSR (Carroll and Shabana 2010 ), as firms create value to society in the long term with a respectful and proactive attitude towards different stakeholders, including their human resources (Carroll 1991 ). Many commentators argued that the CSR agenda had potential to bring a new wave of social benefits as well as gains for the businesses themselves (Fombrun et al. 2000 , Porter and Kramer 2011 ) rather than merely acting on well-intentioned impulses or by reacting to outside pressures (Van Marrewijk 2003 ). Lozano ( 2015 ) indicated that leadership and the business case are the most important internal drivers for responsible companies. Thus, proper incentives may encourage managers ‘to do well by doing good’ (Falck and Heblich 2007 ). If it is a company’s goal to survive and prosper, it can do nothing better than to take a long-term view and understand that if it treats society well, society will return the favour. Companies could direct their discretionary investments to areas (and cost centres) that are relevant to them (Jamali 2007 , Gupta and Sharma 2009 ). The reconciliation of shareholder and other stakeholders addresses the perpetual relationship between business and society, at large.

The legitimate businesses’ response to the demands of stakeholders allow them to meet and even exceed legal, ethical, and public societal expectations (Carroll 1979 ). Therefore, CSR offers prospects for greater credibility and value added as it involves linking altruistic interventions with long-term strategic goals (Jamali 2007 ). Therefore, corporate philanthropic activities, including stewardship programmes could also create social value to the business practitioners themselves (Camilleri 2017 , Baron 2001 , Carroll and Shabana 2010 ). Certain CSR variables including voluntarism, centrality and visibility could possibly relate to value creation (Husted and Allen 2009 ). One would expect that greater voluntarism would lead to greater creation of value, particularly when CSR initiatives arise as the result of industry, tax, or regulatory constraints (Burke and Logsdon 1996 , Husted and Allen 2009 ). In a similar vein, the environmental regulation can also stimulate the innovation and competitiveness among firms (Orlitzky et al. 2011 ). The incorporation of multiple elements of competitive advantage increases the likelihood that a CSR initiative will succeed and create value for the firm (Burke and Logsdon 1996 ). There could be an optimal level of spending on CSR and environmental responsibility, as businesses are expected to continuously balance conflicting stakeholder interests for long term sustainability (Orlitzky et al. 2011 , Camilleri 2017 ).

Environmental sustainability and corporate sustainability

The term “sustainable development” has been defined in many ways, but the most frequently quoted definition is from “Our Common Future”, also known as the Brundtland Report, that was published way back in 1987. A central contribution of this report was the intermittent link between human development and actions toward environmental responsibility for the benefit of future generations (Camilleri 2014 ). Thirty years ago, the sustainable development agenda necessitated empirical research data. Debatably, today academia is calling for more policy and concrete action. Many governments as well as businesses are changing their stance on sustainability as they are becoming more proactive rather than reactive on social and environmental issues. Porter and Kramer ( 2011 : 74) recommended that national governments could set performance standards to big businesses. They suggested that they should not interfere with the methods to achieve them, “those are left to companies” (2011:74). In this day and age, we are increasingly witnessing a growing consensus on principles and regulatory guidelines. The initial flurry of codes and guidelines seem to have settled around a few core standards, such as the Global Reporting Initiative’s Sustainability Reporting Guidelines, the UN Global Compact and the Sustainable Development Goals, the World Resources Institute’s Greenhouse Gas Protocol and the UN Principles for Responsible Investment. This change toward sustainable and responsible business is a long-term process, but the momentum is important to reach the necessary tipping points in public opinion, policy response and business action. As a matter of fact, most of the largest corporations are continuously re-articulating their codes of conduct, certifiable standards, corporate programmes, industry initiatives, green politicians, triple-bottom-line reports and documentaries about sustainability (Brundtland 1987 ). Nevertheless, many of the global challenges are still present today — be they climate change, water depletion, biodiversity loss, bribery and corruption or income inequality, among others.

The term “sustainability” can mean different things to a variety of constituencies. While there may be no objection to the sentiments expressed by multiple stakeholders on the respective definitions for sustainable business, most of them are far from holistic. The sustainability systems may be too complex and varied, and their applications could be quite diverse. Some authors have attempted to relate sustainability with the corporations’ responsible behaviours: Interestingly, the corporate sustainability construct was also related to a nested system consisting of economic, societal, and ecological systems. These pillars are interconnected to each other where the economy is part of society, which is also a fundamental part of the larger ecological system. Corporate sustainability relies on six criteria: eco-efficiency, socio-efficiency, eco-effectiveness, socio-effectiveness, sufficiency and ecological equity (Dyllick and Hockerts 2002 ). These corporate sustainability imperatives can be structured into value systems that could result in a better financial performance (Salzmann et al. 2005 , Van Marrewijk 2003 ). A few researchers have developed (self)-assessment tools, that could be used to audit, analyse and interpret corporate sustainability (Van Marrewijk 2003 , Clarkson 1995 ). However, corporate sustainability may be contingent on different parameters (e.g. technology, regime and visibility) that could vary across industries, plants and countries (Salzmann et al. 2005 ). Corporate sustainability could reduce the downside operational risk as it comprises relevant measures that are intended to increase eco-efficiency, and health and safety performance among other issues (Porter and Kramer 2002 , Porter and Kramer 2011 , Camilleri 2014 ). This means that the economic value of sustainable business strategies could be materialised in the long-term (Weber 2008 , Guenster et al. 2011 ).

Notwithstanding, there are the long term effects of corporate sustainability on intangible assets (e.g. brand value, employee loyalty) could be difficult to quantify (Salzmann et al. 2005 , Dyllick and Hockerts 2002 ). Although some commentators have voiced their opposition to the normative calls in favour of the “sustainability rhetoric” (Salzmann et al. 2005 , Vogel 2007 ), it may appear that we are witnessing a relentless progression from active antagonism, through indifference, to a strong commitment to actively furthering sustainability values, not only within the organization, but across many industries and in our society as a whole. These recent developments imply that the organizations’ commitment to responsible behaviours may represent a transformation of the corporation into a truly sustainable business that is adding value to the business itself, whilst also adding value to society and the environment. Perhaps, there is scope for more collaboration between CSR and corporate sustainability fields. This synergy could help to increase the impact of social and environmental performance research within the field of strategic management. Ultimately, the corporate sustainability’s strategic goals are economic development, institutional effectiveness, stakeholder orientation and sustainable ecosystems (Dyllick and Hockerts 2002 , Shrivastava 1995 ).

Creating value for all: Seeking win-win outcomes with stakeholders

Firms create simultaneous, pluralistic definitions of value whilst targeting their stakeholders. In a similar vein, the resource based view (RBV) theory suggests that the resources of the firm affect its activities and growth, profits and the level of sustained competitive advantage (Barney, 1991 ). Significant areas of study which are synonymous with the corporate sustainability and responsibility approach include, ‘the Virtuous Circles’ (Pava and Krausz 1996 , Preston and O'bannon 1997 , Waddock and Graves 1997 ), ‘The Sustainable Local Enterprise Networks’ (Wheeler et al. 2005 , ‘The Triple Bottom Line Approach’ (Elkington 1998 ), ‘The Supply and Demand Theory of the Firm’ (McWilliams and Siegel 2001 ), ‘The Value Based Networks’ (Wheeler et al. 2003 ), ‘The Base of Pyramid Approaches’ (Anderson and Markides 2007 , Landrum 2007 ), ‘the Win-Win Perspective for CSR practices’ (Falck and Heblich 2007 ), ‘Creating Shared Value’ (Porter and Kramer 2011 , Union 2011 ), ‘Value in Business’ (Lindgreen et al. 2012 ), ‘The Stakeholder Approach to Maximizing Business and Social Value’ (Bhattacharya et al. 2012 ) and ‘Value Creation through Social Strategy’ (Husted et al. 2015 ), among others.

Very often, these value-based theories suggest that businesses should continuously monitor and evaluate their performance in terms of their economic results. It may appear that many of these propositions focus on identifying and expanding the connections between societal and economic progress. Whilst the traditional school of thought for CSR’s had primarily focused on responsibility, Porter and Kramer ( 2011 ) argued that their creating shared value (CSV) approach is inherently different than CSR. Yet, other academics did not view CSV as unrelated to strategic CSR practices (de los Reyes et al. 2016 , Beschorner 2014 ). Porter and Kramer ( 2011 ) contended that their proposed strategy has set out new business opportunities as it creates new markets, improves profitability and strengthens the corporations’ competitive positioning. The reason for this is that the businesses processes in the value chain operate in an environmental setting within their wider community context (Porter 2001 ). It may appear that Porter and Kramer ( 2011 ) had focused on the value chain activities that could bring opportunities for competitive advantage. The authors contended that there is shared value when the organizations’ social value propositions are integrated into their corporate strategies. Therefore, companies could benefit from insights, skills, and resources that cut across profit/non-profit and private/public boundaries. On the other hand, companies will be less successful if they attempt to tackle societal problems on their own.

Porter and Kramer ( 2011 ) maintained that companies could create shared value opportunities by reconceiving products and markets. Hence, new products and services that meet social needs or serve overlooked markets will require new value chain choices in areas such as production, marketing, and distribution. These revised configurations will create demand for equipment and technology that could save energy, conserve resources, and support employees. They argued that their shared value approach redefines productivity in the value chain by enabling local cluster development. They reiterated that their suggested avenues for creating shared value are mutually reinforcing as corporations, their marketplace stakeholders and the governments ought to work together to develop clusters that enable more local procurement and less dispersed supply chains. For example, Nestlé can be considered as a pioneer of the shared value initiative. The multinational organization has accessed new products, reconfigured and secured the value chain by tapping into new or better resources (through partners and cluster development) whilst improving their capabilities (in terms of skills, knowledge and productivity) of its suppliers. Nestlé sources its materials from thousands of farms in developing countries, where it provides training to farmers for sustainable production. This way, the company protects its procurement, raises its standards and maintains a high quality of the raw materials it uses. At the same time, these suppliers run profitable farms, as they offer their children a fairer future through better education. Moreover, both Nestlé and its suppliers are committed to protecting their natural environmental resources for their long-term sustainability. Nestlé’s business principles have incorporated ten United Nations Global Compact Principles on human rights, labour, the environment and corruption. The company maintains that it complies with international regulatory laws and acceptable codes of conduct, as it improves its company’s operations. Firms don’t just need to prepare financial reports. In a lot of countries, they’re legally required to report social and environmental information. And they have to build up accounting systems to do so (Rasche et al. 2013 ). Very often the companies’ responsible management may involve designing business processes and activities in a way that they meet certain social and environmental minimum standards.

Relevant academic literature is indicating that today’s businesses are strategically re-orienting themselves toward corporate sustainability and corporate responsibility whilst focusing on their stakeholders’ needs. Strand et al. ( 2015 ) suggested that CSV necessitates heightened forms of collaboration and stakeholder management as they remarked about the apparent links between creating shared value and stakeholder theory. Strand et al. ( 2015 ) posited that Porter and Kramer’s ( 2011 ) shared value proposition is a response to the competitive, conflict-based view of strategic management that Michael Porter himself helped to create (Strand 2014 ). However, some critics have argued that ‘shared value’ is based on a shallow conception of the corporation’s role in society (de los Reyes et al. 2016 , Crane et al. 2014 , Beschorner 2014 ) For instance, Crane et al. ( 2014 ) held that CSV looks naïve by ignoring the tensions that could exist between social and economic goals. They suggested that this proposition simplifies the role of corporations in society and ignores the challenges arising from business compliance. Their argument was that there are alternative ways to re-invent capitalism (Corazza et al. 2017 ). This strategic approach cannot cure all of society’s ills as not all businesses are good for society, nor would the pursuit of shared value eliminate all injustice (Porter & Kramer, 2014 ). Beschorner ( 2014 ) also noted that the creation of business value and social value may not always go hand in hand. He regarded Porter and Kramer’s ( 2011 ) shared value approach as a reformulation of a classical strategic stakeholder approach that tends to prioritise the relevance of stakeholders according to their influence on the business’ activities. Although shared value seems to address “win-win” business and society issues, it leaves managers ill-equipped to legitimately manage issues where they face the prospect of “win-lose” or “lose-win” social engagements (de los Reyes et al. 2016 ).

The way forward: -corporate sustainability and responsibility

In the past, CSR may have been more associated with corporate philanthropy, stewardship principles, contributions-in-kind toward social and environmental causes, environmental protection, employees’ engagement in community works, volunteerism and pro-bono service among other responsible initiatives. Very often, such altruistic CSR activities may have not resulted in financial performance to the business per se. On the contrary, certain discretionary expenses in corporate philanthropy could have usurped the businesses’ slack resources (including financial assets, labour and time) without adding much value (in terms of corporate reputation and goodwill) to the businesses. Nevertheless, this research reported that the contemporary discourses on corporate social responsibility are opening new opportunities for the businesses themselves. The academic discourse about CSR is moving away from ‘nice-to do’ to ‘doing-well-by-doing-good’ mantra. Evidently, the value-based approaches that were discussed in this paper could be considered as guiding principles that will lead tomorrow’s businesses to long term sustainability (in social and economic terms). Debatably, the profit motive (the business case or corporate sustainability concepts) could be linked with the corporate responsibility agenda. This way, the multinational corporations could be better prepared to address their societal and environmental deficits across the globe, whilst adding value to their business.

This review paper has built on the previous theoretical underpinnings of the corporate social responsibility agenda including Stakeholder Management, Corporate Citizenship and Creating Shared Value as it presents the latest Corporate Sustainability and Responsibility perspective. This value-based model reconciles strategic CSR and environmental management with a stakeholder approach to bring long term corporate sustainability, in terms of economic performance for the business, as well as corporate responsibility’s social outcomes. Recently, some international conferences including Humboldt University’s gatherings in 2014 and 2016 have also raised awareness on this proposition. The corporate sustainability and responsibility concept is linked to improvements to the companies’ internal processes including nvironmental management, human resource management, operations management and marketing (i.e. Corporate Sustainability). At the same time, it raises awareness on the businesses’ responsible behaviours (i.e. Corporate Responsibility) toward stakeholders including the government, suppliers, customers and the community, among others. The fundamental motivation behind this approach is the view that creating connections between stakeholders in the value chain will open-up unseen opportunities for the competitive advantage of responsible businesses, as illustrated in Table  2 .

Corporate sustainability and responsibility focuses on exploiting opportunities that reconcile differing stakeholder demands as many corporations out there are investing in corporate sustainability and responsible business practices (Lozano 2015 ). Their active engagement with multiple stakeholders (both internal and external stakeholders) will ultimately create synergistic value for all (Camilleri 2017 ).

Multinational organizations are under increased pressures from stakeholders (particularly customers and consumer associations) to revisit their numerous processes in their value chain activities. Each stage of the company’s production process, from the supply chain to the transformation of resources could add value to their businesses’ operational costs as they produce end-products. However, the businesses are always expected to be responsible in their internal processes toward their employees or toward their suppliers’ labour force. Therefore, this corporate sustainability and responsibility perspective demands that businesses create economic and societal value by re-aligning their corporate objectives with stakeholder management and environmental responsibility. In sum, corporate sustainability and responsibility may only happen when companies demonstrate their genuine willingness to add corporate responsible dimensions and stakeholder engagement to their value propositions. This occurs when businesses opt for responsible managerial practices that are integral to their overall corporate strategy. These strategic behaviours create opportunities for them to improve the well-being of stakeholders as they reduce negative externalities on the environment. The negative externalities can be eliminated by developing integrated approaches that are driven by ethical and sustainability principles. Very often, multinational businesses are in a position to mitigate risk and to avoid inconveniences to third parties. For instance, major accidents including BP’s Deep Horizon oil spill in 2010, or the collapse of Primark’s Rana Plaza factory in Bangladesh, back in 2013, could have been prevented if the big businesses were responsible beforehand.

In conclusion, the corporate sustainability and responsibility construct is about embedding sustainability and responsibility by seeking out and connecting with the stakeholders’ varied interests. As firms reap profits and grow, there is a possibility that they generate virtuous circles of positive multiplier effects (Camilleri 2017 ). Therefore, corporate sustainability and responsibility can be considered as strategic in its intents and purposes. Indeed, the businesses are capable of being socially and environmentally responsible ‘citizens’ as they are doing well, economically. This theoretical paper has contributed to academic knowledge as it explained the foundations for corporate sustainability and responsibility. Although this concept is still evolving, the debate among academic commentators is slowly but surely raising awareness on responsible managerial practices and on the skills and competences that are needed to deliver strategic results that create value for businesses, society and the environment.

Limitations and future research avenues

No research is without limitations. This conceptual paper could not have featured all of the contributions that are related to CSR’s value driven notions. However, the scope of this paper has been reached. The corporate sustainability and responsibility proposition could appeal to business practitioners themselves, as sustainable and responsible behaviours may bring significant improvements to their firms’ bottom lines. Of course, there are diverse contexts across different industry sectors (and jurisdictions) that will surely influence the successful implementation of corporate sustainability and responsibility practices and their reporting mechanisms. Notwithstanding, it may prove difficult to quantify the tangible and intangible benefits of corporate sustainability and responsibility. Future theoretical and empirical research may address these challenging issues, in further detail. Indeed, there is also potential for more conceptual development in this promising area of strategic management.

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• Corporate sustainability and responsibility
• Creating shared value

ORIGINAL RESEARCH article

The impact of corporate social responsibility on sustainable innovation: a case in china’s heavy pollution industry.

• 1 School of Economics and Management, University of Science and Technology Beijing, Beijing, China
• 2 The Institute of Low Carbon Operations Strategy for Beijing Enterprises, Beijing, China

Exploring the impact of corporate social responsibility (CSR) fulfillment and disclosure on enterprises’ sustainable innovation capacity can not only expand the research boundary of factors of sustainable innovation and the impact of CSR, but it can also serve as a reference for the decision-making of listed companies in increasing pollution problems. Using a sample of 224 Chinese A-share businesses in the heavy pollution industry listed between 2016 and 2020 and employing an ordinary least square regression, the results provide empirical evidence that CSR is positively associated with sustainable innovation. Second, the business environment can serve as a moderator of the relationship between CSR and sustainable innovation, and the positive relationship between CSR and sustainable innovation is more pronounced in regions with better macroeconomic conditions. Additionally, the improvement of CSR for sustainable innovation is more clear in state-owned firms than in non-state-owned enterprises. After a series of robustness tests that eliminate marketization, law enforcement, and macro-political unpredictability, the results still hold. This study broadens the scope of CSR and sustainable innovation research. In addition, the theoretical and practical significance of this study’s findings is referenced in this paper.

Introduction

Environmental and climate concerns caused by the intensification of global industrialization are irreversible. Corporate social responsibility (CSR) is a successful approach that encourages businesses to take on additional duties to support social and sustainable development, given the growing consensus in modern global business on the value of sustainable development ( Bauman and Skitka, 2012 ). Innovation is one of the primary drivers of boosting sustainability development ( Silvestre and Neto, 2014 ) and positively impact green performance ( Sharma et al., 2021 ). Scholars pay close attention to the expanding literature on CSR and sustainable innovation ( Shakeel et al., 2020 ).

Economy ( Al-Hadi et al., 2019 ), legislation ( Lau et al., 2018 ), morality ( Mikulka et al., 2020 ), society, and the environment should be firms’ primary responsibilities ( Amor-Esteban et al., 2019 ). It highlights that CSR is not only to fully consider stakeholders and execute the comprehensive social contract but also to increase economic performance ( Cho et al., 2019 ) while assuming environmental obligations. In recent years, there have been many forms of studies on CSR’s influence and influence elements. National culture and corporate governance ( Garcia-Sanchez et al., 2016 ; Mohamed Adnan et al., 2018 ), social media ( Grygiel and Brown, 2019 ), ethics ( Galvão et al., 2019 ; Smith et al., 2021 ), corporate reputation, and customer satisfaction ( Li et al., 2019 ; Yu and Liang, 2020 ; Bogdan et al., 2021 ), corporate integrity culture ( Wan et al., 2020 ; Khan et al., 2022 ). Sustainability strategy, performance, stakeholders, developing nations, climate change, and supply chain management are the research keywords for CSR ( Ye et al., 2020 ). An innovative and sustainable organization respects the environment’s capacity to support and protect its ecosystem’s resources while pursuing economic efficiency ( Severo et al., 2017 ). The research model incorporated CSR as the direction of future development, and sustainable innovation aimed at the environment can boost the economic and environmental performance of businesses ( Ahmad et al., 2021 ).

As a fundamental aspect of sustainable development, the importance of sustainable innovation is self-evident ( Silvestre and Ţîrcă, 2019 ). Prior research shows the connection between people, businesses, and creativity. Environmental sustainability has actively supported the innovation of sustainable business practices ( Shahzad et al., 2020 ). Higher enterprise innovation success is associated with greater CSR ( Wu et al., 2018 ). In recent years, however, there have been few studies on the relationship between sustainable innovation and CSR. Based on social capital and stakeholder theories, CSR impacts innovation performance in an inverted U-shape. The direction of CSR’s influence on innovation may vary among industries ( Liu et al., 2021 ). The association between sustainable innovation and CSR, therefore, requires additional study. Additionally, from an industry perspective, businesses in different industries require different fundamental resources for innovation; therefore, CSR data must be distinguished according to the industry in the study. Existing literature focuses mostly on the fashion sector ( Arrigo, 2013 ), the semiconductor business ( Lu et al., 2013 ), the banking industry ( Istianingsih et al., 2020 ), and the energy industry ( Arrigo, 2013 ; Lu et al., 2013 , 2019 ; Istianingsih et al., 2020 ).

It is common knowledge that significantly polluting companies have a far greater detrimental influence on the ecological environment than others do ( Xie et al., 2022 ). Because of China’s large consumption of traditional fossil fuels, the country’s environmental quality has worsened significantly, attracting the international community’s utmost concern ( Dong et al., 2021 ). China is the largest manufacturing nation in the world. According to the China Statistical Yearbook 2021, 68% of total energy consumption is attributable to enterprises with elevated levels of pollution. To advance the aims of “carbon peak” and “carbon neutral,” more studies must be undertaken on industries with elevated levels of pollution. Since the reform and opening of China 40 years ago, China’s industry has boomed. The prior development, however, was overly reliant on energy and resource input and production scale expansion. China’s industrial expansion followed a broad pattern of growth, inflicting serious environmental and ecosystem harm ( Zhang J. et al., 2017 ). Traditional industries with high energy consumption, high emissions, and high pollutants will have a considerable influence on the environment. Innovation is one of the driving forces for China’s sustainable industrial development ( Yuan and Zhang, 2020 ). In recent years, China’s environmental rules and regulations have been increasingly stringent, and the sustainable development of China’s heavy pollution sectors has steadily become dependent on green development that considers innovation and environmental considerations. However, Fang et al. (2019) discovered in their research that heavy pollution sectors face the conundrum of “effective but not environmentally friendly innovation.” Consequently, it is vital to investigate further the performance of China’s heavy polluting sectors in terms of sustainable development.

This article picks Chinese A-share listed firms from 2016 to 2020 as its research object and empirically examines the impact of CSR on enterprises’ sustainable innovation capacity. The findings show that the output of green innovation considerably enhances business sustainability. Given the sustainable development of businesses, the following questions are posed in this study. How can CSR foster innovation and sustainability? Does the influence of CSR on the capacity for sustainable innovation vary by corporate environment? What is the state of CSR in the Chinese heavy polluting industry?

The following are the primary contributions of this work. First, it expands the literature on sustainable innovation and CSR, which contributes to the development of a fresh perspective for the study of the factors influencing the sustainable innovation capacity of businesses. Existing studies have investigated more CSR-influencing aspects, however, there remains a dearth of studies on CSR’s role. As opposed to undertaking a standard analysis at the firm or national level, this study focuses on publicly traded enterprises in China’s heavy pollution industry. This study can therefore serve as a substantial contribution to the research on the sustainable development of the heavy pollution sector and give theoretical support for the heavy pollution industry to realize its low-carbon transformation goals. Third, most previous research has ignored the societal dimensions of CSR in general ( Chen and Wan, 2020 ). In this study, the business environment is included as a moderating variable in the research model to investigate the impact of macroeconomic conditions on the relationship between sustainable innovation and CSR. The data passed the test for robustness. Thus, our findings may be useful to policymakers by identifying social normative force and illuminating how it drives businesses. Given that CSR has a significant impact on the interests of stakeholders, this study can also assist stakeholders in making more informed judgments about the sustainable innovation of businesses.

The organization of this investigation is as follows: The literature review and research hypotheses are provided in Section “Literature Reviews and Research Hypotheses”. The third section of this study describes the research design, including the variables, sample, and model selection. The section “Robustness Tests” consists of empirical analysis, findings reporting, and comments. Section “Conclusions and Policy Recommendations” highlights the theoretical and practical implications’ conclusions and policy recommendations.

Literature Reviews and Research Hypotheses

Sustainable innovation and csr.

According to the stakeholder theory, (CSR) entails that the development of businesses should include stakeholders, including employees, consumers, suppliers, and communities ( Turker, 2009 ). By adhering to principles of CSR, businesses can foster confidence and excellent connections with internal and external stakeholders and effectively drive innovation ( Lins et al., 2016 ).

Everything related to CSR can have a favorable effect on shareholder profitability ( Pucheta-Martínez and Gallego-Álvarez, 2021 ). CSR provides shareholders with economic profits, management and operational knowledge, and motivation to work on CSR. Shareholder-related CSR can increase shareholder confidence in innovative investment opportunities ( Iyer and Soberman, 2016 ). Employee-focused CSR can facilitate employee identification with the organization. When employees acknowledge a firm’s commitment to environmental sustainability, they encourage the organization to regard environmental preservation as a competitive advantage-enhancing opportunity ( Ernst and Jensen Schleiter, 2021 ). Enterprises boost social and environmental performance through pro-environment behavior and stimulate employees’ green behaviors, which has a favorable effect on employees’ innovative technology exploration ( Xu et al., 2022 ). Green human resource management may promote the sustainability of enterprises as an essential technique for influencing the green behavior of employees ( Amjad et al., 2021 ; Zhu et al., 2021 ). Employee green creativity is regarded as the driving force behind company green innovation, and employee green behavior is a crucial metric for measuring employee green creativity ( Jiang et al., 2020 ). Gaudencio et al. (2017) found that CSR increases employee job satisfaction and organizational commitment and has a beneficial effect on the establishment of a stable innovation team ( Ho, 2017 ). CSR receives greater attention the more optimistic the customer’s attitude. Customers like to buy products that perform well in terms of social responsibility ( Iyer and Soberman, 2016 ). Because of client desires, businesses produce added items through technological innovation. In addition, CSR can influence the behavior and selection of suppliers ( Kumar et al., 2014 ; Zhang M. et al., 2017 ; Govindan et al., 2018 ). Companies in a supply chain that apply CSR-related practices can enhance not just their performance, but also that of their supply chain partners ( Yang et al., 2020 ). Businesses may develop societal trust and a positive public image by engaging in CSR. Because of these factors, businesses can foster economic performance and innovative conduct.

Many researchers have conducted studies on sustainable innovation. Sustainable innovation is described as an innovation model with sustainable innovation goals in the creative development process ( Cagliano and Behnam, 2019 ). It exemplifies innovation that is advantageous for environmental quality improvement and social collaboration ( Zhang et al., 2022 ). The enterprises’ green innovation behavior can be considered the performance of sustainable innovation. Important to sustainable development, green innovation promotes innovative technology and concepts ( Liao et al., 2022 ). In addition to ensuring efficient resource usage and effective pollution reduction, the competitive advantage of green innovation rests in achieving optimal economic performance ( Fernando et al., 2019 ). Studies have shown that CSR can assist stakeholders in increasing their profitability and further promote green investment and pro-environment behavior, which is reflected in sustainable innovation’s success. Consequently, we suggest our initial hypothesis:

H1 : The output of CSR can significantly enhance the corporate sustainable innovation performance.

The Moderating Role of the Business Environment

Environment and resources limit the development and operation of heavy pollution industries, which are specialized sectors. In other words, high pollution businesses operate in an environment that is dynamic and constantly changing. Instead of operating in a vacuum, organizations are formed by their surroundings ( Harrison and Pelletier, 1998 ). The environment of an organization is its means of survival. Considered one of the aspects determining the sustainable performance of a corporation is the business environment ( Alqudah et al., 2021 ). The optimization of the business environment can foster technological innovation and enhance the product quality and technological level of businesses. In addition, the optimization of the market environment facilitates firm entry and enhances market rivalry, hence interesting incumbent enterprises to do technological research and development. The development of environmental technologies can foster sustainable innovation in industries with high pollution levels.

Based on the preceding study, the following is the second hypothesis:

H2 : The promotion effect of the output of CSR on sustainable innovation performance is more significant when the business environment is poor.

Materials and Methods

Sample selection and data sources.

This study focuses on the Chinese A-share firms involved in severe pollution industries from 2016 to 2020. Two thousand sixteen is the most recent year for which we have comprehensive data. Given that some data are unavailable at the time of this study, 2020 has been chosen as the conclusion date. The scope of sample selection refers to the CSMAR database and the classification standards of heavily polluting industries in The Guidelines for Environmental Information Disclosure of Listed Companies by the Chinese Ministry of Environmental Protection. To assure the validity of the empirical research, the sample is treated as follows. First, to avoid the influence of outliers, firms with anomalous financial status, ST, * ST, suspended listing, and delisting between 2016 and 2020 were omitted from this study. Second, we eliminate samples devoid of CSR and other variable values. Third, to prevent the influence of extreme values, we eliminate the samples from 2016-to 2020 for which the value of sustainable innovation is zero. The CSR statistics are from the social responsibility reports of HeXun Net-listed enterprises. The data on sustainable innovation comes from the National Intellectual Property Patent Database and the Green List of International Patent Classification maintained by the World Intellectual Property Organization (WIPO). Other data sources include the China Statistical Yearbook, the China Environmental Statistical Yearbook, the annual reports of publicly traded enterprises, and the RESSET database.

Dependent Variable (Sustainable Innovation)

According to the current body of research, there are no accepted criteria for measuring the sustainable innovation of businesses. The patent data of an enterprise directly reflects its technological innovation accomplishments, and the number of patents can be used to gauge an enterprise’s innovation level ( Abraham and Moitra, 2001 ; Albino et al., 2014 ). This study selects patent applications for green inventions and green utility models as indicators of sustainable innovation.

Independent Variable (CSR)

The social responsibility assessment system of HeXun Net comprises fifty subdivision indicators. The entire system is based on shareholder responsibility, employee accountability, supplier, customer, consumer responsibility, environmental responsibility, and social responsibility. The findings represent CSR compliance and transparency.

Moderating Variable (Business Environment)

The business environment is selected as the moderating variable in this study. The concept of conducting business is derived from the World Bank’s Doing Business Report. The World Bank evaluates the business climate from a national and regional standpoint. This study requires more granular indicators for provincial regions. Consequently, this article utilizes the research on the evaluation index system of the business environment ( Yang and Wei, 2021 ) to objectively calculate the business environment index of the city where the firms are located. This index system comprises per capita GDP, average salary level, consumption rate, per capita fixed asset investment, and GDP growth rate as indicators and takes into consideration disparities in economic development level and human capital from the standpoint of the macroeconomic environment.

Control Variables

Drawing on the previous empirical research on CSR ( Ali and Frynas, 2017 ; Su, 2019 ; Chen and Wan, 2020 ; Wan et al., 2020 ), this study also selects control variables as follows: the size of the company (SIZE), price-to-book ratio (PB), profitability (LEV), return on total assets (ROA), years of establishment (AGE), cash flow (CASH), shareholding nature (SOE), managerial shareholding ratio (MSH), board independence (INDEP), and duality (DUAL).

The definitions and interpretations of all variables are shown in Table 1 .

Table 1 . Variable definitions.

Empirical Models

Based on the previous studies ( Chen and Wan, 2020 ; Chen and Ji, 2022 ; Liao et al., 2022 ; Xie et al., 2022 ), this study establishes Equation 1 and use the OLS regression method to investigate the impact of CSR on the sustainable innovation.

Results and Discussions

Descriptive statistics.

The variables’ descriptive statistics for the entire sample are presented in Table 2 . As shown in the table, the mean and median values are 1.887 and 1.0986, respectively, whereas the 25% levels and maximum CSR are 0.0000 and 8.9200, showing that there are considerable disparities in SI performance among the studied organizations. The mean and median CSR values are 24.7164 and 19.8650, respectively, while the minimum, 25%, 75%, and maximum CSR values are −11.7700, 15.3025, 26.4050, and 85.7700, indicating that the sampled organizations perform poorly on CSR. Both the capacity for sustainable innovation and performing CSR among the samples have a significant space for development. The 25% and 75% thresholds of ENVIR are 0.3833 and 0.5445, respectively, showing that the macroeconomic contexts in which the studied enterprises operate are distinct. The minimum and maximum CASH values are −7.7700 and 17.5900, respectively, indicating that there are significant variances in operational capability among the examined organizations. The mean for independent SOEs is 0.4375, meaning that 43.75% of the studied enterprises are government-owned. Moreover, there are significant variances in many sample parameters, such as SIZE, PB, LEV, ROA, and MSH, necessitating the inclusion of these control variables in this model. Table 2 additionally provides descriptive analysis results for other variables.

Table 2 . Descriptive statistics.

Correlation Analysis

The Pearson correlation coefficients between the variables are displayed in Table 3 . Consistent with hypothesis H1, the correlation study demonstrates that SI is significantly consistent with CSR at the 1% level, providing early evidence that corporate integrity culture is favorably associated with a firm’s CSR performance.

Table 3 . Correlation analysis of variables.

In general, if the correlation coefficients between independent variables are less than or equal to 0.80, the model may not have significant multicollinearity issues. All correlation coefficients between independent variables in this model are less than 0.454. There is hence no multicollinearity issue. The findings of the univariate correlation analysis are shown above, and the results of the multivariate regression analysis will be presented below.

Multivariate Regression Results

Table 4 displays the findings of a multivariate regression on the effect of CSR e on sustainable innovation. Although the modified R2 (0.147) is insufficient, the F -value shows that the models as a whole are significant (18.506). Model (1)'s regression output comprises independent variables and control variables. CSR has a significantly positive impact on sustainable innovation (0.016, t  = 7.018), as shown in the table. This positive correlation implies that hypothesis H1 proposed in this paper’s research hypothesis section has been confirmed by the empirical study. The findings suggest that organizations that prioritize CSR fulfillment and disclosure have a greater capability for sustainable innovation. Since the existing research has identified the influencing factors of CSR, we choose several representative corporate management variables as control variables, and the regression results of the control variables in Model (1) are most consistent with expectations. Among the control variables, the SIZE, AGE, CASH, SOE, and INDEP regression coefficients are significantly positive. A greater number of independent directors, a larger asset size, a longer listing period, more asset liquidity, and more stable equity are all correlated with a higher ability for sustainable innovation. Significantly negative regression coefficients for PB can be observed. The lower the price-to-book ratio, the greater the company’s investment value and growth prospects, and hence its emphasis on sustainable innovation. Several research has previously investigated and proven the inherent positive impact of CSR, innovation, and sustainable development ( Silvestre and Ţîrcă, 2019 ; Sharma et al., 2021 ; Chen and Ji, 2022 ; Liao et al., 2022 ). This study’s findings are consistent with past research in this area. In addition, the data confirm the likelihood that CSR in various industries may have varied effects on sustainable innovation at various times ( Liu et al., 2021 ). This may owe to the various key resources utilized by various sectors. In the context of China’s carbon peak and carbon neutrality objectives, firms in the heavy pollution industry that place a premium on CSR will prioritize their sustainable development and guide stakeholders to engage in sustainable innovation.

Table 4 . Regression results of sustainable innovation and CSR.

The H2 hypothesis investigates the effect of the business environment on the relationship between sustainable innovation and CSR. Before assessing the business environment moderating, we standardize the data. Table 4 displays the regression findings for Model (2). We derived varying business climate scores based on the location of the businesses. The business environment has a considerable impact on the interaction between sustainable innovation and CSR. The enhanced R2 of 0.203 indicates that the model has a better fitting effect. This positive correlation demonstrates that the empirical investigation has confirmed the hypothesis H2 proposed in the research hypothesis section of this work. Objectively, the business environment plays a moderating role. On the one hand, when businesses perform well in terms of CSR, a better macroeconomic climate can bring about greater investment possibilities and human capital to encourage the development of sustainable innovation capability. In contrast, when a business is in a location with a more favorable economic climate, market rivalry and government laws will encourage the business to adhere to CSR and prioritize sustainable development. When businesses are in regions with more favorable economic conditions, they are more likely to have easier access to capital, hence bolstering budgets for sustainable innovation. Consequently, the ability for sustainable innovation may increase. In addition, the coefficients and significance of other control variables in this model are consistent with expectations.

Robustness Tests

Controlling the effects of marketization and law enforcement.

In addition, we control for the effects of marketization and law enforcement, both of which may impact the CSR of local firms. For instance, Du et al. (2016) observed that the amount of law enforcement in an area has a considerable impact on the CSR performance of local businesses and that the enforcement of regulations varies greatly throughout Chinese provinces. Based on a prior study ( Wang et al., 2008 ; Chen and Wan, 2020 ), one should additionally evaluate a region’s marketization. We use the regional marketization index and the legal environment index in conjunction with prior research ( Wan et al., 2020 ) to assess the marketization process and regional law enforcement in China ( Fan et al., 2011 ). Table 5 displays the outcomes. We add the control variable MARKET to the regression model in column (1). In column (2), the control variable LAW is incorporated into the regression model. In column (3), both MARKET and LAW are included as control variables in the regression model. The results of the three models are comparable, showing that the influence of CSR on sustainable innovation remains positively significant. Therefore, the localization of the market for law enforcement has no bearing on our argument regarding the relationship between CSR and sustainable innovation. The empirical findings remain valid.

Table 5 . Controlling for the effects of marketization and law enforcement.

Exclusion of Alternative Explanations

Chen and Ji (2022) discovered that research results may only be confirmed during a period with a negative macro-political environment and fade during other eras. Therefore, it is essential to rule out this other explanation and re-evaluate our samples. In 2017, for instance, the 19th National Congress of the Chinese Communist Party was held. In addition, COVID-19 affected most of China in 2020. Both can be unpredictable macro-political environment elements. As a result, we choose the policy environment index ( Yang and Wei, 2021 ) as a proxy to measure the macro-political environment of a region. To facilitate comparisons, we divide our sample into two groups based on whether macro-political environment uncertainty is high or low and recalculate the regression results. The value of the policy environment index that is below the mean shows macro-political environment uncertainty, whereas a value above the mean indicates political environment uncertainty. The results presented in Table 6 for samples of high and low political uncertainty are consistent with those presented in prior tables. The macro-political environment does not affect our outcomes.

Table 6 . Exclusion for political uncertainty.

Conclusion and Policy Recommendations

In recent years, China has established the goals of carbon peak and carbon neutrality, as well as intensified its efforts to change heavy polluting industries to promote energy saving, emission reduction, and sustainable growth. This research investigates the relationship between sustainable innovation and the CSR of China’s big polluters that are publicly traded. Exploring the impact of CSR on the sustainable innovation capacity of enterprises can not only broaden the scope of research on the impact mechanism of sustainable enterprises’ development capacity and the effect consequences of CSR but also serve as a guide for the decision-making of publicly traded companies in the heavy pollution industry. Based on the data of China’s A-share heavy pollution listed companies from 2016 to 2020, we evaluated the effect of CSR fulfillment and disclosure on green patent applications. Through a series of robustness tests, the results are unaffected by marketization, law enforcement, and macro-political unpredictability.

The outcomes reveal: (1) CSR significantly improves the sustainable innovation capacity of businesses and (2) when a business is in a region with a more favorable macroeconomic environment, the effect of CSR on sustainable innovation capacity is more pronounced. Additionally, the improvement of CSR for sustainable innovation is more clear in state-owned firms than in non-state-owned enterprises. CSR has a more favorable effect on sustainable innovation when the board is more independent. These results also indicate that the government and independent directors can serve as a check, a balance, and a supervisor to encourage stakeholders to prioritize CSR and promote sustainable innovation capacity from the sidelines, particularly in China’s heavy pollution industry.

Policy Recommendations

This study’s findings have the following implications for businesses, their managers, and legislators. In the first place, our empirical findings demonstrate that CSR greatly improves sustainable innovation potential. Therefore, corporate managers must acknowledge the significance of CSR. They should place a greater emphasis on the outcomes of sustainable innovation and realize the sustainable development of businesses through sustainable innovation. Due to the stimulation of macroeconomic environmental conditions, firms in the heavy polluting industry will pay greater attention to the fulfillment and disclosure of CSR and support the strengthening of their capacity for sustainable innovation. Currently, heavy polluting industries, particularly manufacturing, are shifting from China’s economically developed eastern areas to the economically depressed center and western regions. If the government does not prioritize local economic growth, it may negatively affect the local ecology. Moreover, by addressing internal governance characteristics, businesses can mitigate the detrimental impact of the regional transfer on sustainable innovation. Thirdly, green human resource management methods can improve the environmental performance and sustainability of businesses ( Roscoe et al., 2019 ; Bazrkar and Moshiripour, 2021 ). Incorporating sustainability measures into the human resource management system ( Sabokro et al., 2021 ) and recognizing the role of human resource management for the achievement of long-term sustainability in industrial development are therefore options for heavy pollution industries. In conclusion, businesses should integrate green and sustainable practices into their overall development plan.

Limitations and Future Research Directions

This study has limitations that necessitate more investigation. Due to the availability of data, this report only includes information from 2016 to 2020. Due to China’s ongoing efforts in energy saving and emission reduction during the past few years, results may vary over time. In addition, this article examined the impact of CSR on sustainable innovation from the standpoint of CSR. In future, we can also examine the effects of the many components of CSR. Lastly, the proportion of highly educated employees and research and development professionals might be viewed as elements that influence the sustainable innovation capacity of businesses.

Data Availability Statement

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

Author Contributions

XL: investigation, data curation, modeling and experiment. RY: methodology, supervision, and writing. XZ: review and editing. All authors contributed to the article and approved the submitted version.

The work was supported by the National Natural Science Foundation of China (no. 71802021, no. 71602008), Beijing Natural Science Foundation (no. 9184023), Beijing Municipal Education Commission Foundation (BJSJ2020001, BJSJ2019001, BJSJ2018009), the Fundamental Research Funds for the Central Universities (no. FRF-BD-20-15A, no. FRF-BR-20-01C) and Beijing Philosophy and Social Science Planning Project (no. 21JCC089).

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

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Keywords: sustainable innovation, corporate social responsibility, heavy pollution industry, business environment, sustainable development

Citation: Yan R, Li X and Zhu X (2022) The Impact of Corporate Social Responsibility on Sustainable Innovation: A Case in China’s Heavy Pollution Industry. Front. Psychol . 13:946570. doi: 10.3389/fpsyg.2022.946570

Received: 17 May 2022; Accepted: 09 June 2022; Published: 04 July 2022.

Reviewed by:

Copyright © 2022 Yan, Li and Zhu. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) . The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Xiaoning Zhu, [email protected]

Disclaimer: All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article or claim that may be made by its manufacturer is not guaranteed or endorsed by the publisher.