corporate social responsibility definition essay

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What Is CSR?

• Understanding CSR

Types of CSR

Company examples, the bottom line.

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What Is CSR? Corporate Social Responsibility Explained

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. 

By practicing corporate social responsibility, also called corporate citizenship , companies are aware of how they impact aspects of society, including economic, social, and environmental. Engaging in CSR means a company operates in ways that enhance society and the environment instead of contributing negatively to them.

Key Takeaways

• Corporate social responsibility is a business model by which companies make a concerted effort to operate in ways that enhance rather than degrade society and the environment.
• CSR can help improve society and promote a positive brand image for companies.
• CSR includes four categories: environmental impacts, ethical responsibility, philanthropic endeavors, and financial responsibilities.

Understanding Corporate Social Responsibility (CSR)

Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands. A socially responsible company is accountable to itself and its shareholders. CSR is commonly a strategy employed by large corporations. The more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry .

Small and midsize businesses also create social responsibility programs, although their initiatives are rarely as well-publicized as those of larger corporations.

• Environmental responsibility: Corporate social responsibility is rooted in preserving the environment. A company can pursue environmental stewardship by reducing pollution and emissions in manufacturing, recycling materials, replenishing natural resources like trees, or creating product lines consistent with CSR.
• Ethical responsibility: Corporate social responsibility includes acting fairly and ethically. Instances of ethical responsibility include fair treatment of all customers regardless of age, race, culture, or sexual orientation, favorable pay and benefits for employees, vendor use across demographics, full disclosures, and transparency for investors.
• Philanthropic responsibility: CSR requires a company to contribute to society, whether a company donates profit to charities, enters into transactions only with suppliers or vendors that align with the company philanthropically, supports employee philanthropic endeavors, or sponsors fundraising events.
• Financial responsibility: A company might make plans to be more environmentally, ethically, and philanthropically focused, however, it must back these plans through financial investments in programs, donations, or product research including research and development for products that encourage sustainability, creating a diverse workforce, or implementing DEI, social awareness, or environmental initiatives.

Volunteering

Some corporate social responsibility models replace financial responsibility with a sense of volunteerism. Otherwise, most models still include environmental, ethical, and philanthropic as types of CSR.

Benefits of CSR

According to a study published in the Journal of Consumer Psychology, consumers are more likely to act favorably toward a company that has acted to benefit its customers. As a company engages in CSR, it is more likely to receive favorable brand recognition . Additionally, workers are more likely to stay with a company they believe in. This reduces employee turnover, disgruntled workers, and the total cost of a new employee .

For companies looking to outperform the market, enacting CSR strategies may improve how investors view the company's value. The Boston Consulting Group found that companies considered leaders in environmental, social, or governance matters had an 11% valuation premium over their competitors.

CSR practices help companies mitigate risk by avoiding troubling situations. This includes preventing adverse activities such as discrimination against employee groups, disregard for natural resources, unethical use of company funds, and activity that leads to lawsuits, and litigation .

CSR programs can raise morale in the workplace.  

In its 2022 Environmental and Social Impact Report, Starbucks ( SBUX ) highlights taking care of its workforce and the planet among its CSR priorities through stock grants and additional medical, family, and educational benefits. The company's goals include achieving 50% reductions in greenhouse gas emissions, water consumption, and waste by 2030.

Home Depot ( HD ) has invested more than 1 million hours per year in training to help front-line employees advance in their careers, aims to produce or procure 100% renewable energy to operate its facilities by 2030, and has plans to spend $5 billion per year with diverse suppliers by 2025.

General Motors won the Sustainability Leadership Award from the Business Intelligence Group in 2022. The automaker provided $60 million in grants to more than 400 U.S. nonprofits focusing on social issues, and it has agreements in place to use 100% renewable electricity at its U.S. sites by 2025.

Why Should a Company Implement CSR Strategies?

Many companies view CSR as an integral part of their brand image, believing customers will be more likely to do business with brands they perceive to be more ethical. In this sense, CSR activities can be an important component of corporate public relations. At the same time, some company founders are also motivated to engage in CSR due to their convictions.

What Is ISO 26000?

In 2010, the International Organization for Standardization (ISO) released ISO 26000, a set of voluntary standards to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies social responsibility and helps organizations translate CSR principles into practical actions.

What Are the Benefits of CSR?

CRS initiatives strive to have a positive impact on the world through direct benefits to society, nature and the community in which a business operations. In addition, a company may experience internal benefits through the initiatives. Knowing their company is promoting good causes, employee satisfaction may increase and retention of staff may be strengthened. In addition, members of society may be more likely to choose to transact with companies that are attempting to make a more conscious positive impact beyond the scope of its business.

What Companies Have the Best CSR?

Since 1999, Corporate Responsibility Magazine has ranked the top 100 Best Corporate Citizens each year among the 1,000 largest U.S. public companies. Rankings are based on employee relations, environmental impact, human rights, governance, and financial decisions. In 2023, the top-ranked companies include Hewlett-Packard Enterprise Company, Accenture, and Hasbro.

Companies striving to measure success beyond bottom-line financial results may adopt CSR strategies that target environmental, ethical, philanthropic, and fiscal responsibility that extend beyond the products they sell.

Society for Consumer Psychology. " Good Guys Can Finish First: How Brand Reputation Affects Extension Evaluations ."

Boston Consulting Group. " Your Supply Chain Needs a Sustainability Strategy ."

Frontiers in Psychology. " Corporate Social Responsibility and Employee Engagement: Enabling Employees to Employ More of Their Whole Selves at Work ."

Starbucks. " 2022 Starbucks Global Environmental and Social Impact Report ," Pages 6 and 32.

Home Depot. " ESG Report (2022) ," Pages 9-10.

General Motors. " 2022 Sustainability Report ," Pages 6-7.

International Organization for Standardization. " ISO 26000, Social Responsibility ."

3BL Media. " 100 Best Corporate Citizens of 2023 ."

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Published: 22 December 2023 Contributors: Amanda McGrath, Alexandra Jonker

Corporate social responsibility (CSR) is the idea that businesses should operate according to principles and policies that make a positive impact on society and the environment.

Through CSR, companies make decisions driven by financial gain and profitability, and the impact of their actions on their communities and the world at large. CSR goes beyond legal obligations: by voluntarily adopting ethical, sustainable and responsible business practices, companies seek to deliver benefits to consumers, shareholders, employees and society.

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Often, a company’s business model and practices are built around financial goals. However, CSR programs encourage business leaders to consider corporate citizenship or the larger impact of the business on society when making decisions. Corporate social responsibility helps companies ensure that their operations are ethical, safe and delivering positive impact wherever possible. Through CSR initiatives, companies work to limit environmental impact, contribute to solving societal problems (such as poverty and inequality) and ensure their brand identity reflects their values.

The theory of the “ triple bottom line ” can help organizations as they pursue corporate social responsibility. As a financial framework, the triple bottom line refers to the idea that a company’s business model should revolve around the three P’s: people, planet and profit. By maximizing all three, a company aims to make a positive impact on the world and remove barriers to growth.

Corporate social responsibility initiatives generally fall into four categories: environmental, ethical, philanthropic and economic. Each type of CSR contributes to a company’s overall CSR strategy.

More companies are assessing their overall environmental impact and engaging in CSR efforts that aim to protect natural resources and minimize any contribution to climate change. CSR encourages sustainability in business through eco-friendly practices, such as by reducing energy consumption, using renewable resources and minimizing waste.

Environmental responsibility hinges on eliminating negative impacts of business operations (primarily through limiting pollution-causing activities) as well as offsetting them through actions such as planting trees and engaging in programs that support biodiversity.

CSR initiatives often focus on social impact and human rights concerns, such as ensuring fair wages, safe working conditions and proper treatment of employees and suppliers. They also encourage accountability both internally and externally. Ethical CSR may include abiding by fair labor practices, ending workplace discrimination and ensuring supply chain transparency.

CSR practices include donating money, resources or time to positive causes and organizations, such as local and national charities, educational programs, disaster relief and more. Businesses who adopt philanthropic CSR engage with the communities where they operate, offering support through volunteer work, sponsoring local events, making contributions to local nonprofits or supporting skills training programs.

Corporate social responsibility involves ensuring that money is not a company’s sole motivator. To demonstrate this, companies enact policies and procedures to make sure their choices align with values, even if the alternatives may save money or boost profitability. Economic CSR also includes efforts to support the economic development and growth of the communities in which a business operates—for example, supporting job training and job creation efforts and forging local partnerships.

The benefits of CSR include:

CSR can have a positive impact on an organization’s brand identity as well as its bottom line. Some CSR efforts, such as improving energy efficiency, can reduce operating costs and might lead to savings in the end. Consumers increasingly prefer brands that share their values, and CSR policies offer ways for organizations to demonstrate those values, building trust and loyalty to fuel a competitive advantage.

CSR can also help attract top talent and drive employee engagement and retention, as more workers seek employers whose values align with their own. Additionally, a proactive approach to ethical and social issues has the potential to prevent legal problems, fines and reputational damage.

CSR initiatives can help people become more responsible consumers, making it easier for them to access products and services that align with their values and educating them on issues of sustainability and ethical consumption. It can encourage companies to prioritize and invest in testing, quality control and safety measures. CSR can also minimize the likelihood of defective or harmful products reaching consumers.

CSR can have a positive impact on the overall health of the planet, as it encourages environmental responsibility and sustainable practices. CSR initiatives can help companies reduce their greenhouse gas emissions or pursue net-zero emissions goals that are key to slowing climate change. They might also help conserve natural resources, reduce pollution and limit disruption of ecosystems. Additionally, a focus on CSR can support investment in research and development of eco-friendly products and practices.

Corporate social responsibility can help support local communities and address societal issues, such as poverty, inequality and environmental concerns. CSR initiatives can fuel economic growth by creating jobs. They can also shape public opinion as companies leading the way inspire others to follow suit, creating a positive ripple effect. A focus on ethical behavior at the corporate level reinforces a broader norm of ethical behavior across other parts of society.

Consumers are increasingly seeking products and services from socially responsible companies. Meanwhile, many investors are prioritizing companies whose values are clear and aligned with their own. To meet these demands, businesses are integrating CSR into their operations. In addition, global expansion and the increasingly interconnected nature of supply chains pushes companies to comply with a growing web of regulatory environments and to better confront the impact of their business on communities around the world.

With increased awareness of environmental issues, labor practices and ethical concerns, combined with better research and communication, CSR is now more central to business strategies. Some companies even have dedicated CSR departments.

Examples of CSR include:

• Donating a percentage of profits to environmental or social causes
• Committing to using recycled and eco-friendly materials
• Sourcing fair-trade materials and ingredients
• Engaging in social activism or fundraising on behalf of social causes
• Using technology such as artificial intelligence (AI) to drive energy efficiency and reduce carbon footprints
• Creating programs for the ethical use and disposal of products, such as electronics recycling programs
• Instituting diversity, equity and inclusion (DEI) programs that support efforts to diversify and grow the workforce in new ways
• Supporting programs that replenish the natural resources, such as water or timber, used for production
• Turning to renewable energy sources and other strategies that help in the pursuit of net-zero or carbon-neutral goals
• Establishing employee well-being programs that support their physical and mental health

Corporate social responsibility is the overall ethos that drives a company to adopt policies and practices that support sustainability, societal and other ethical ends. Environmental, social and governance (ESG) is about the ways in which their impact is measured or quantified. While both CSR and ESG are about reflecting the company’s values, CSR is typically seen as more of an internal framework, while ESG frameworks are often used externally as a way of demonstrating real-world impact.

Because the parameters of corporate social responsibility are continually evolving, there is no single standard by which CSR initiatives are measured or governed. Companies that embrace CSR are guided by local and international laws, including environmental regulations, labor rules and consumer protection standards.

Some efforts are also held to industry-specific standards; for example, the Global Reporting Initiative (GRI) provides reporting standards for sustainability. Organizations like the United Nations have introduced global guidance, such as the Sustainable Development Goals (SDGs), which encourage businesses to adopt sustainable practices.

Many companies that embrace CSR will also engage in CSR reporting , through which they document performance of non-financial metrics and provide transparency on social and environmental impact. CSR reporting is typically voluntary; however, some jurisdictions mandate that large organizations disclose social and environmental performance, so that investors and consumers can assess CSR efforts.

Some organizations have designated corporate social responsibility teams that oversee a company's CSR activities. People on these teams plan and run the social and environmental programs that align with the company's values and goals. They work with company leadership to devise the overall CSR strategy and engage stakeholders, including employees, customers, investors and community partners, to help them succeed. They also typically track and report on their progress by using metrics and other methods of assessment, deal with compliance and regulatory issues and manage communication about the company’s CSR efforts both internally and externally.

Simplify the capture, consolidation, management, analysis and reporting of your environmental, social and governance (ESG) data.

CSR reporting is the practice of reporting an organization’s performance of non-financial metrics, providing transparency on the organization’s impact on society and the environment.

Net zero is the point at which greenhouse gases emitted into the atmosphere are balanced by an equivalent amount removed from the atmosphere.

The goal of the CRSD is to provide transparency that will help stakeholders better evaluate EU companies’ sustainability performance as well as the related business impacts and risks.

The triple bottom line (TBL) is a sustainability framework that revolves around the three P’s: people, planet and profit.

Sustainability in business refers to a company's strategy and actions to eliminate the adverse environmental and social impacts caused by business operations.

Decarbonization is a method of climate change mitigation that reduces greenhouse gas (GHG) emissions, as well as removes them from the atmosphere.

Simplify the capture, consolidation, management, analysis and reporting of your environmental, social and governance (ESG) data with IBM Envizi ESG Suite.

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Article contents

Corporate social responsibility.

• Abagail McWilliams Abagail McWilliams College of Business Administration, University of Illinois at Chicago
• https://doi.org/10.1093/acrefore/9780190224851.013.12
• Published online: 28 February 2020

Corporate social responsibility (CSR) is a legitimate responsibility to society, based on the principle that corporations should share some of the benefit that accrues from the control of vast resources. CSR goes beyond the legal, ethical, and financial obligations that create profits.

In the research literature, corporate social responsibility is defined in a variety of ways, depending on the aspect of CSR being examined. An inclusive definition is that social responsibility requires the firm to take into account the interests of all stakeholders, where stakeholders are defined as everyone who affects or is affected by the firm’s decisions and actions. A firm-focused definition holds that social responsibility includes actions that further a social goal, beyond what is required by ethics, law, and profitability. A political economy–oriented definition posits that firms have a responsibility to correct market failures such as negative externalities and government failures such as limits to jurisdiction that result in worker rights violations.

When implemented, altruistic CSR implies that firms provide a social good unrelated to the firms’ business that does not benefit the bottom line. Strategic CSR implies that firms are simultaneously profitable and socially responsible. To achieve this, CSR must be a core value of the firm and must be integrated into processes and products. When employed strategically, CSR can be an element of a differentiation strategy, leading to premium prices, enhanced brand and firm reputation, and supportive community relations. Corporate environmental responsibility often takes the form of overcompliance with regulation, improving the environment more than is required. A primary benefit of this is to stave off further regulation.

To capture the benefits of being socially responsible, the firm must make stakeholders aware of its record. This has led to triple bottom line reporting—that is, reporting about firm performance in terms of profits, people, and the planet. Social enterprises go a step further and make social responsibility the primary goal of the organization.

• corporate environmental responsibility (CER)
• corporate social performance (CSP)
• greenwashing
• overcompliance
• political corporate social responsibility
• psychological benefits
• stakeholders
• strategic CSR
• sustainability
• triple bottom line

Historical Perspective

Corporate social responsibility (CSR) can be thought of as legitimate responsibility to society that goes beyond the legal, ethical, and financial obligations that create profits, based on the principle that corporations should share some of the benefit that accrues from the control of vast resources. Or, more plainly, in market economies corporations can amass great wealth because society protects their right to do so, therefore the corporations owe something back to all of society, not just those engaged in market exchange with the corporations. The world’s resources should benefit the poorest in addition to the wealthiest, and corporations can be the conduit through which resources are befittingly distributed.

When resources are not equitably distributed, the disadvantaged look first to the government for help and support. But when the government hasn’t the resources, the will, or either, it cannot provide adequately for those in need and may engineer public policy to require businesses to be responsible.

The idea that corporations should act responsibly dates back to the inception of industrialization. With industrialization, the poor were often driven off the land and into cities to look for employment. The available employment, however, did not pay a living wage for an individual, let alone a family. This led to crushing poverty, ill health, and short lives for the working poor. Some industries employed young children, and low pay and inhumane working conditions were common (Marx & Engels, 1967 ). In general, governments didn’t have the will to require firms to act responsibly toward exploited groups. However, in 1833 , the English Parliament passed Lord Althorp’s Factory Act, which effectively regulated child labor in the textile industry in England. Responsible behavior was forced upon rich industrialists, but more importantly the act established the right of government to regulate industry for a clear social purpose (Marvel, 1977 ).

A hundred years after the passage of the first effective industrial regulation, the plight of the disadvantaged was not much improved. The Great Depression highlighted the resource disparities inherent in industrialized economies and triggered attention to the lack of social responsibility displayed by wealthy corporations. But World War II intervened, and the focus turned away from social needs and toward supplying the military. After the war ended and throughout the 1950s, economies turned to modernization and, in much of the world, replacement of lost industrial capacity. It was a time of great prosperity in industrial nations, but, as before, the benefits of prosperity were not equally distributed. The politically weak, including women and minorities, didn’t garner much of the benefits.

In the 1960s there was intense focus on social problems, including disparity of opportunity as well as disparity of resources. It was clear that disadvantaged groups did not have equal access to resources, many of which were controlled by corporations for the benefit of their shareholders. As women and minorities gained political power, calls for corporations to be socially responsible became more direct and visible.

Definitions

There are myriad definitions of corporate social responsibility, a few of which follow. In a managerial context, McWilliams and Siegel ( 2001 , p. 117) define corporate social responsibility as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law.” From an economic perspective, Lundgren ( 2011 , p. 70) defines corporate social responsibility as “actions that, to some degree, imply corporate beyond-compliance behavior in the social and/or the environmental arena,” and Bénabou and Tirole ( 2010 , p. 2) define corporate social responsibility as “sacrificing profits in the social interest.” From a political economy viewpoint, Heal ( 2005 , p. 387) defines corporate social responsibility as “a programme of actions to reduce externalized costs or to avoid distributional conflicts.” The examples go on, with Dahlsrud examining 37 of them and concluding that “Although they apply different phrases, the definitions are predominantly congruent, making the lack of one universally accepted definition less problematic than it might seem at first glance ( 2008 , p. 6).” In a discussion of why there is no definitive definition of corporate social responsibility, McWilliams, Rupp, Siegel, Stahl, and Waldman ( 2019 , p. 3) speculate that “Targeted definitions allow researchers to focus on an area of study such as the environment or stakeholders, or on processes such as operations or strategy, while broad definitions allow interdisciplinary discourse on the motivations and ramifications of CSR.”

Beyond defining what corporate social responsibility is, it is helpful to clarify related terms that are sometimes confused with corporate social responsibility.

Compliance, Ethics, and the Triple Bottom Line

The terms compliance, ethics, and corporate social responsibility are often used interchangeably, but mistakenly so. Carroll’s pyramid of responsibilities is a good guide for separating the concepts. According to Carroll, compliance is a legal requirement, while ethics is the requirement to do no harm, and corporate social responsibility is the expectation for corporations to go beyond compliance and ethics and do good for society, creating social value (Carroll, 1991 ).

But being socially responsible and being irresponsible are not mirror images of each other. That is, being socially responsible is not just the absence of irresponsibility, and neither is social irresponsibility simply the absence of being responsible. Failing to meet any of the three explicit requirements of fiscal responsibility, laws, and ethics is irresponsible management. But meeting all three of these responsibilities does not rise to being socially responsible. Between irresponsible and socially responsible is the state of meeting fiscal, legal, and ethical responsibilities while not going the extra mile to create social good. This can be called socially neutral.

Corporate social responsibility is sometimes referred to as balancing the triple bottom line: profits, people, and the planet. The triple bottom line incorporates the idea of economic, social, and environmental concerns for which a corporation may have responsibility. A corporation that measures its performance against a triple bottom line explicitly promotes a broader responsibility than that of profit maximization and uses triple bottom line performance to convey to internal and external stakeholders that the corporation is being socially responsible in its decisions and operations.

Theoretical Perspectives

Conventional exclusionary view.

Nobel Prize–winning economist Milton Friedman argued that the responsibility of business is to maximize profits for the benefit of the owners (shareholders), within ethical and legal boundaries. Responsibility for social programs, he argued, rightfully adheres to elected officials (Friedman, 1970 ).

Arrow ( 1973 ) challenged Friedman’s broad conclusion that corporations have no responsibilities beyond profit maximization on two counts. Count one is that production often generates negative externalities (such as air and water pollution) that are not appropriately priced in the market. Count two is that there is asymmetric information between producers and consumers. Producers have more knowledge about the true quality (and therefore true value) of products than do the consumers who purchase them. Arrow concludes these two market imperfections create a social responsibility for corporations because, while externalities are sometimes regulated by government, asymmetric information is not, and both can be addressed more efficiently by corporations than by governments.

Heal ( 2005 ) offers an updated perspective of corporate social responsibility that builds on Arrow, adding the risk of protests, such as Occupy Wall Street, to Arrow’s challenge of Friedman. Heal proposes that corporate social responsibility programs (such as corporate environmentalism) can reduce externalities and also ward off conflicts and demands for distributive justice, such as Black Lives Matter (Schulz, 2017 ). Arrow and Heal’s arguments also provide a basis for stakeholder theory.

Inclusive View

Stakeholder theory challenges the assumption that shareholders have the only valid claim on the resources controlled by corporations. Freeman and Reed ( 1983 ) argue that any group that affects or is affected by the behavior of the corporation is a stakeholder whose interests should be considered in corporate decision-making. As corporations increasingly acknowledged responsibilities beyond profit maximization, stakeholder management became a means of enhancing firms’ reputations and improving community relations, and stakeholder theory became a dominant logic in corporate social responsibility. Incorporating stakeholder theory into strategic management has resulted in stakeholder analysis being directed at helping managers identify stakeholders and prioritize claims on corporate resources (Chandler, 2017 ).

Carroll ( 1991 ) repudiates Friedman’s conclusion that corporations have no social responsibility. He proposes a normative model of corporations as organizations with multiple responsibilities: economic/fiscal, legal, ethical, and philanthropic. The economic responsibility is necessary for survival, legal responsibility is required for legitimacy, ethical responsibility is required to do no harm, and philanthropic responsibilities are expected of a good corporate citizen. Carroll depicts the responsibilities as a pyramid, with profitability as the base, followed by legal, then ethical and finally philanthropic as the pinnacle. Carroll’s characterization of corporate responsibility is that it includes all four categories, including the philanthropic contributions to the community to promote social good. However, philanthropy differs in being expected, but not required.

Economic View

To explain the link between corporate social responsibility and profitability, McWilliams and Siegel ( 2001 ) take a micro-economic–based theory of the firm perspective. From this perspective, they assume that corporate managers seek to maximize profits and ask the question: How can managers determine the optimal amount of investment to make in corporate social responsibility, that is, how can they determine the amount of investment in corporate social responsibility that is consistent with profit maximization? They propose that corporate social responsibility can be a component of a differentiation strategy. Consumers demonstrate a demand for socially responsible products (e.g., LED lights, free trade coffee, hybrid vehicles) and production processes (e.g., animal-free testing, green production, organic farming), and firms respond by adding the demanded socially responsible characteristics, thereby creating a differentiated product. The added costs of differentiating the product lead to premium prices. McWilliams and Siegel ( 2001 ) therefore conclude that, because the investment in corporate social responsibility supports the firm’s differentiation strategy, it should be treated the same as any strategic investment. To maximize profits, the corporation should invest up to the point where the additional cost of corporate social responsibility is equal to the additional revenue generated by corporate social responsibility.

Lundgren ( 2011 ) provides a formal, mathematical model of corporate social responsibility at the firm level based on micro-economic theory. He proposes that the costs of socially responsible programs can be offset by the increased revenues from consumers who value corporate social responsibility and the increased market value generated by investors who value corporate social responsibility. He explicitly models goodwill capital, an intangible asset, as a primary benefit of corporate social responsibility, tying corporate social responsibility explicitly to firm value and potential profitability.

Corporate social responsibility can also be conceptualized as a form of reputation insurance that protects the firm’s reputation when adverse events occur (Minor & Morgan, 2011 ). Adverse events, such as the 2010 Deepwater Horizon oil spill, are especially costly because they include both direct cost—such as fines, legal costs, and compensation to injured parties—and the indirect costs associated with loss of corporate reputation (Mejri & DeWolf, 2013 ). Loss of reputation can affect stock price, financing terms, and future revenue far into the future. When an adverse event occurs, external stakeholders will make judgments about what went wrong. They may decide that the adverse event was the result of poor management and downgrade the reputation of the firm or they may decide that the event was just bad luck and not recalibrate the reputation of the firm. Being known for corporate social responsibility can sway external judgments in favor of management and the firm, protecting the firm’s reputation and significantly lowering the indirect costs of such an event.

Political View

Bagnoli and Watts ( 2003 ) characterize corporate social responsibility as the private provision (by the corporation) of a public good (such as pollution abatement). Building on this, Scherer and Palazzo ( 2011 ) propose that globalization of business has resulted in political, rather than normative or economic, corporate social responsibility. They point out that laws and regulations are enforced within national boundaries, while social problems know no boundaries and negative externalities (such as air pollution) cross boundaries. The void in global governance may be (perhaps by necessity) addressed by businesses, especially multinational corporations. According to Scherer and Palazzo ( 2011 ), political corporate social responsibility suggests that corporations will contribute to global regulation (such as sustainability or workplace safety) and provide public goods (such as human rights protections and community wellness programs).

Bénabou and Tirole ( 2010 ) characterize corporate social responsibility as a response to government failure. They discuss three ways in which governments fail: capture by special interest groups, limits to jurisdiction, and poor information and inefficiency.

In addressing the problem of limited jurisdiction, Christmann ( 2004 ) suggested that multinationals will embrace a global strategy so that they can transfer best practices of social responsibility across boundaries, effectively creating global standards. Multinational corporations that enforce the same standards everywhere they operate may be merely complying with regulation in their home country but being socially responsible in countries with lower standards. Implementing the same standards globally allows multinational corporations to be more efficient by taking advantage of scale economies and also benefiting from reputation insurance.

McWilliams and Siegel ( 2011 ) reject Baron’s view that motivation determines what is socially responsible behavior and, in contrast, argue that social responsibility that is motivated by profitability can reconcile Friedman’s view of the profit maximization responsibility of the firm with that of social responsibility. That is, by being socially responsible, firms can attend to the bottom line (profits) while also creating social good. This is known as strategic corporate social responsibility, a term introduced by Burke and Logsdon ( 1996 ). To the extent that corporations are meeting expectations of stakeholders, strategic corporate social responsibility disputes Friedman’s view that social responsibility adheres to public officials. According to the Organisation for Economic Co-operation and Development, “Strategic behaviour is the general term for actions taken by firms which are intended to influence the market in which they compete. Strategic behavior includes actions to influence rivals to act cooperatively so as to raise joint profits, as well as non-cooperative actions to raise the firm’s profits at the expense of rivals” (OECD, 2007 , p. 751).

McWilliams and Siegel ( 2001 ) concluded that firms can respond to demands for corporate social responsibility by incorporating social responsibility into a differentiation strategy. The firm differentiates its products/services to include CSR attributes, as well as incorporating CSR into firm processes. Differentiation should allow the firm to charge premium prices to cover additional costs of providing the socially responsible attributes.

However, when asymmetric information allows firms that do not engage in corporate social responsibility to position their products as similar to those that do embody corporate social responsibility, the socially responsible firm may face a competitive disadvantage. The socially responsible firm invests in corporate social responsibility but cannot charge more than the firms that do not. In this situation, the socially responsible firms may be forced to lobby their government for legally enforceable standards that apply to all firms in the industry (Heslin & Ochoa, 2008 ). Conversely, some firms will lobby for standards that cost their competitors more to meet than they cost the lobbying firm. The lobbying firm can create a competitive advantage by masking competitive behavior as social responsibility (McWilliams, Van Fleet, & Cory, 2002 ).

An important distinction of strategic corporate social responsibility is that it is embedded in the corporation’s operations, processes, and core competencies (Aguinis & Glavas, 2013 ), regardless of whether it is implicit as was more conventional in European companies or explicit as in U.S. companies (Matten & Moon, 2008 ). Embedding corporate social responsibility allows for synergistic effects, such as when a steel company uses its core competency in plant design and construction to build plants that are more efficient and use less energy (i.e., are environmentally responsible). Linking the corporation’s social responsibility to its core competencies can produce maximum social benefit. Being explicit and transparent about its corporate social responsibility also enables and enhances positive effects on firm reputation (Servaes & Tamayo, 2013 ).

Corporate social responsibility can be a long-term strategic asset that enhances reputation and brand image. As such, it can lead to customer loyalty and repeat sales and, in some industries, premium prices. Originally thought to only support a differentiation strategy, we now see corporate social responsibility prominently reported by low-cost-leader companies in business-to-business and commodity industries (Nucor, 2018 ). This indicates that while corporate social responsibility can support premium pricing, it also can result in lower costs, such as lower financing costs, lower legal costs, or lower turnover costs, as well as a higher-quality, better-motivated workforce (Sprinkle & Maines, 2010 ). Therefore, strategic corporate social responsibility can support a low-cost-leader strategy when embedded in the core competencies that create low-cost advantage.

However, corporate social responsibility activities will create benefits for the corporation only if they are effectively and honestly communicated to internal and external stakeholders (Lee, Oh, & Kim, 2013 ). When the corporation appears to be claiming to do more than it actually does, employees and consumers quickly become jaded and remain skeptical of future corporate social responsibility claims. Therefore, corporations must be forthright about their social responsibility so as to not generate or escalate skepticism.

Environmental

Environmental responsibility is one of the fastest growing areas of corporate social responsibility worldwide. Because compliance with environmental standards is a legal responsibility, being socially responsible means overcompliance. Corporate environmentalism is sometimes referred to as corporate environmental responsibility.

In the United States, the Environmental Protection Agency (EPA) was created by executive order in 1970 and made responsible for enforcing environmental laws. Early regulation was command and control: the EPA set standards and mandated how corporations complied. Over time, more attention was paid to gathering and disseminating information, and corporations moved to design solutions that met standards in more efficient/cost-effective ways, providing a springboard for corporate environmentalism.

Maxwell, Lyon, and Hackett ( 2000 ) couched corporate environmentalism as strategic self-regulation to preempt political action. They find that the threat of increased regulation is sufficient to prompt corporations to overcomply with existing environmental regulation. Because political action is costly for the firm and for the activists, it makes sense for firms to overcomply to fend off political action, benefiting both the corporation and the environment.

Voluntary environmental reporting such as the Global Reporting Initiative of 1997 encourages corporations to overcomply with environmental regulations and to actively engage in corporate environmentalism (Sheehy, 2019 ) to enhance firm reputation and brand. A reputation for environmentalism can result in many benefits, including attracting environmentally conscious consumers and investors (Lyon & Maxwell, 2008 ), the aforementioned preemption of regulation, and lower legal and financing costs. This last is a result of the lower probability that the firm will incur legal costs as a result of violating environmental standards, such as those tied to oil spills and poisonous gas leaks, since the internal target exceeds the legal regulation (Sheehy, 2019 ).

Environmental laws and regulations differ around the globe, requiring firms to be aware of local regulations but also providing them with opportunities to search for favorable (presumably less stringent) standards. However, Dowell, Hart, and Yeung ( 2000 ) found that firms that enforce the most stringent regulations worldwide are most successful. Additionally, Nidumolu, Prahalad, and Rangaswami ( 2009 ) found that corporations that innovate ahead of increasing standards have time to experiment and test new solutions and that corporations that enforce a single standard worldwide can take advantage of scale economies.

Conversely, corporate environmentalism branding can have serious negative consequences if not designed and implemented properly. Firms that fail to deliver on their environmental claims can be charged with “greenwashing,” that is, overstating their environmentalism. A particularly insidious form of “greenwashing” takes place when a corporation masks its true environmental performance by engaging in selective disclosure of benign impacts rather than full disclosure (Marquis, Toffel, & Zhou, 2016 ). In an empirical study of “greenwashing,” Walker and Wan ( 2012 ) demonstrated that claiming to be green (i.e., environmentally responsible) without actual green behavior negatively affects a corporation’s financial performance.

Sustainability

Corporate environmentalism increasingly embraces sustainability, which is a more comprehensive program of environmental stewardship. Sustainability requires attention to global and intergenerational effects of corporate operations.

According to the 1987 UN Brundtland report (World Commission on Environment and Development, 1987 ), “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” is sustainable. From this, one can extrapolate a definition of corporate environmental sustainability that incorporates a universal dimension—not just a clean environment where the corporation operates now, but a global and intergenerational one. That is, socially responsible corporations must consider the effects of current operations on the environment both now and in the future. They must also balance current and future economic and equity responsibilities.

Sustainability implies more than environmental impact management: all resources must be managed to ensure sustainability. Corporations must be mindful of how they manage farm land, forests, ocean fish stocks, animal and plant breeding, and valuable minerals, as well as how they can support sustainable development in developing economies. Hart ( 2010 ) coined the phrase “sustainable global enterprise” to label multinational enterprises that deliver economic, social, and environmental benefits across all their global operations. An example of a sustainable global enterprise is a multinational food company that “has implemented living wage standards for all of its farm workers in every country in which it harvests fruit, and which has introduced state-of-the-art environmental practices throughout its supply chain” (Aguilera, Rupp, Williams, & Ganapathi, 2007 , p. 838).

Nidumolu et al. ( 2009 ) studied sustainability initiatives of multinational corporations and found that embracing sustainability led to innovation that creates better products and new businesses, increases brand loyalty, and reduces costs—contributing to both the top line (revenue) and bottom line (profitability) of the corporation. Consumers perceive that products that are produced sustainably or have sustainable characteristics are better products and, therefore, worth more. New revenue streams can come from businesses created by recycling and reusing products that have exhausted their original purpose. Additional revenue is generated when consumers develop brand loyalty through their experience with sustainable products. Cost reductions come from using fewer inputs in all parts of the value chain (from raw materials, through production and distribution to final sales). Additionally, firms that anticipate increasing environmental regulation can innovate ahead of their competitors and reap first-mover advantages. All of these increase the bottom line as well as being socially responsible.

Social Enterprise

The simplest type of corporate social responsibility is philanthropy, where a corporation donates part of its profits to programs that address social problems. The inner workings of the firm, its organization, its mission, its strategy, etc., are unaffected by the goals of the programs that receive financial support.

The social goods produced by the financially supported programs can be peripheral to the corporation. Some corporations that engage in strategic corporate social responsibility explicitly align social goods produced with other strategic components of the firm. For example, firms may have “buy one–give one” program where customers buy a branded product (e.g., a pair of shoes) and the firm gives one (pair of shoes) to a child in need. The social mission is less peripheral to profit-making.

Social enterprises go one step further than that and make their social mission part of the firm’s core. Defourny and Nyssens ( 2008 , p. 202) define social enterprises as “not-for-profit private organizations providing goods or services directly related to their explicit aim to benefit the community.”

One type of social enterprise is a benefit corporation, which is a legal business entity that is required to have a social mission at its core (Hiller, 2013 ). In the United States, the need for a new legal form of for-profit that explicitly recognizes a social mission led to laws in some states that allow for benefit corporations. These corporations must declare themselves as such in their articles of incorporation and are required to submit to review by an independent third party to confirm that they are fulfilling their social mission. It should be noted that the independent review of the impact of benefit corporations is holistic—that is, it comprises all of the effects of the corporation on society, not merely its effect on selected areas such as profitability and environmentalism (B Lab Company, 2017 ). This is in contrast to standard corporations, which can legally engage in “greenwashing,” promoting corporate social responsibility activities while simultaneously obfuscating socially irresponsible actions (Marquis et al., 2016 ; Walker & Wan, 2012 ).

Another type of social enterprise is social entrepreneurship, which is an “innovative, social value creating activity that can occur within or across the nonprofit, business, or government sectors” (Austin, Stevenson, & Wei-Skillern, 2012 , p. 371). While the social mission is always core to social entrepreneurship, it is not always obviously so, because it may be either explicit or implicit. In social entrepreneurship for the disadvantaged the social mission is explicit, that is, benefits (such as jobs) are provided to the disadvantaged. In social entrepreneurship by the disadvantaged, there is an implicit social mission of improving the (disadvantaged) entrepreneur’s circumstances, irrespective of whether there is an explicit social mission, such as providing jobs for others who are disadvantaged (Renko & Freeman, 2019 ).

The implicit social mission of entrepreneurship by the disadvantaged provides a conduit for social good created by corporate social responsibility programs, making support of entrepreneurship an attractive option for firms that engage with disadvantaged populations. For example, multinational corporations in Africa are adding to their corporate social responsibility portfolios the support of entrepreneurship in disadvantaged economies through education, training, and skills development initiatives (DeBerry-Spence, Torres, & Hinson, 2019 ).

The Business Case

The business case for corporate social responsibility refers to the belief that there is a causal link between being socially responsible and achieving profitability. It is argued that firms that do good (for society) will do well (be more profitable and have higher market value). In the context of corporate social responsibility, “doing well” can be the result of many advantages, such as premium pricing, repeat sales, higher employee productivity, lower cost of capital, or lower legal costs, all of which may translate into higher profitability and firm value in either the short run or the long run. Determining if firms “do good” is more problematic but is generally referred to as corporate social performance, which Wood defines as “a business organization’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm’s societal relationships” ( 1991 , p. 693). Two widely used measures of corporate social performance are the Fortune Corporate Reputation Index and the Kinder, Lydenberg and Domini (KLD) index of reputation (Fombrun, Gardberg, & Sever, 2000 ).

In the 1990s the business case for corporate social responsibility (doing well by doing good) became a dominant theme in academic research. Countless empirical studies attempted to show a causal link between corporate social responsibility and corporate financial performance. These studies were hampered by difficulties in defining and measuring corporate social performance, often leading to inconsistent results (Margolis & Walsh, 2003 ) and sometimes suffering from lack of methodological rigor (McWilliams & Siegel, 2000 ). Barnett ( 2007 ) concludes that there is no universal evidence of doing well by doing good, because doing well is contingent upon the corporation, the timing, and the particular socially responsible investment. He suggests that academic research should focus on figuring out when, where, and what type of social responsibility will allow corporations to do well by doing good. Carroll and Shabana ( 2010 , p. 101) support Barnett’s findings and conclude that “the benefits of CSR are not homogeneous, and effective CSR initiatives are not generic.”

Although meta-analyses have been conducted (e.g., Friede, Busch, & Bassen, 2015 ) in an attempt to make sense of the inconsistent results of earlier studies, the inclusion of criticized empirical studies and the bias toward publishing only studies that have statistically significant results makes the results of meta-analyses problematic. Given the inherent difficulties of testing the business case for corporate social responsibility, including, “the inaccessibility, both apparent and actual, of good data” (Wood, 2010 , p. 75) and the lack of consensus on appropriate methodology, academic research has subsequently moved beyond trying to empirically verify a causal link between corporate social responsibility and profitability to accepting that corporations have social responsibilities and examining how such responsibilities can be met to the advantage of the corporation and society, ultimately arriving at the concept of strategic corporate social responsibility.

Non-Pecuniary Benefits

Although it’s difficult to separate out and quantify the effects of corporate social responsibility on firm performance, the effects on individuals can be measured directly by survey methodology. Therefore, we have better evidence of the non-pecuniary effects of corporate social responsibility than we have of corporate social performance. Corporate social responsibility is by definition about the corporation, but it is individuals who make decisions, carry out corporate social responsibility programs, and are affected by corporate actions. Stakeholders such as managers, employees, consumers, investors, and community members can shape and be shaped by corporate social responsibility activity and consequently often receive psychological benefits from their association with socially responsible corporations. The psychological benefits generated by these associations with the corporation are a component of the social value created by corporations that engage in corporate social responsibility.

Internal Stakeholders

Internal stakeholders include managers, employees, and board members, all of whom may affect or be affected by the firm’s social responsibility programs, processes, and reputation. Corporate social responsibility can be initiated by managers for personal reasons, including personal values, religious beliefs, commitment to social causes, professional image building, or a need to feel good about themselves (Hemingway & Maclagan, 2004 ). Manager-initiated corporate social responsibility can be either strategic or philanthropic, depending on the constraints of corporate governance, firm strategic orientation, and the availability of discretionary funds. Managers receive a psychological benefit when they can support their personal values, religious beliefs, or identity. It is common for large corporations to have social responsibility officers who shape the culture and reputation of the firm, maintain corporate social responsibility programs, and communicate to internal and external stakeholders. These executives have more opportunity to reap social and psychological benefits from corporate social responsibility.

In general, people desire to have meaning in their lives and often look for meaning in their work. Aguinis and Glavas ( 2019 ) explored how corporate social responsibility can help employees find meaning in their work. The closer the fit between the corporation’s identity and the employee’s identity, the more meaningful the work will seem. For example, a person who identifies as a caregiver will find meaningfulness in their work in a hospital. Corporate social responsibility programs provide additional information and experience that can help workers find more meaning in their work, that is, they may perceive that their work can serve a greater purpose.

Corporate social responsibility can affect employees’ perceptions and attitudes about their work and workplace. Gavin and Maynard ( 1975 ) tested the relationship between the employee’s perception of the corporation’s concern for the environment and the employee’s general satisfaction with their employment. They found that employees tended to report more satisfaction the greater the perceived corporate concern for the environment. Perhaps more telling, they found that the younger workers in the 1970s were most concerned about corporate environmentalism, which perhaps foretold increasing environmental awareness and activism.

Chong ( 2009 ) examined how participation in corporate social responsibility programs affect employee’s understanding and commitment to the corporation’s identity, where organization identity can be defined as “the set of meanings by which a company allows itself to be known and through which it allows people to describe, remember and relate to it” (Wheeler, Richey, Tokkman, & Sablynski, 2006 , p. 98). Chong found that participation in corporate social responsibility programs feeds off of and reinforces corporate identity, resulting in the employee experiencing higher motivation, satisfaction, and commitment to the corporation.

Mozes, Josman, and Yaniv ( 2011 ) studied the relationship between corporate social responsibility activity and both organizational identification (a driver of loyalty) and motivation to work. Workers in their study were classified as either active participants or non-active participants in volunteerism programs. Active participants demonstrated higher levels of organizational identification and motivation to work. To be most effective for external beneficiaries and most meaningful for the employees, corporate social responsibility must be embedded in the routines and processes of the organization (Aguinis & Glavas, 2013 ).

Meister ( 2012 ) found that 53% of workers surveyed by the nonprofit Net Impact reported that having a job where they can make a difference to society is important to their happiness. Further, 72% of students getting ready to enter the workforce also felt this way. According to Meister, to recruit and retain young top talent, corporations not only have to engage in corporate social responsibility, they must communicate their engagement through social media.

External Stakeholders

External stakeholders may be affected by the firm’s social responsibility programs, processes, or products, but as outsiders they do not affect these. External stakeholders include consumers, suppliers, investors, and community.

Consumers derive psychological value from purchasing socially responsible products. According to Green and Peloza ( 2011 ) there are three categories of benefit: emotional, social, and functional. Buying products from socially responsible companies allows consumers to feel good about themselves. This emotional response can be associated with companies that make charitable contributions to social causes. Consumers feels good about themselves (emotional benefit) for buying from a company that is altruistic. Alternatively, buying products from a socially responsible company can define the consumer as a good person to others and elevate their position in the community (social benefit). This social response can be associated with companies that champion a social cause such as environmental sustainability. Functional benefit comes from purchasing products that function better because of CSR attributes, such as fuel-efficient cars. The three types of benefit can work together and amplify each other. “For example, a hybrid vehicle can provide functional value (lower operating costs), emotional value (joy in saving or environmental stewardship), and social value (meeting relevant norms)” (Green & Peloza, 2011 , p. 52). For consumers to derive value from corporate social responsibility, they must be aware of it. Corporations traditionally used company reports, web pages, and advertising to make consumers aware of their corporate social responsibility but are now feeling pressure to communicate more broadly and often over social media.

Socially responsible investing provides psychological value to investors. According to Beal, Goyen, and Philips ( 2005 ), this value can take the form of “fun of participation” similar to what gamblers experience, or it can take the form of happiness similar to that generated by pleasurable activities. Psychological value augments the financial returns to socially responsible investments and helps explain the decision to invest in screened funds. According to Dam and Scholtens ( 2015 , p. 104), “consumers receive a warm-glow” when they invest responsibly.

Benefits to Investors

Investing in socially responsible firms, commonly referred to as socially responsible investing (SRI), is a way for investors to join their values and their desire for monetary gain. This has become easier for individual and institutional investors with the growth of mutual funds focused on socially responsible investing. At the start of 2018 there was over $30 trillion invested in socially responsible stock, with nearly half this amount held in Europe (Global Sustainable Investment Alliance, 2019 ). In the United States there are mutual funds that filter for social responsibility, allowing individual and institutional investors to encourage socially responsible corporations while withholding support from firms that engage in industries (such as gambling) or activities (such as genetic modification) that are not viewed as socially responsible. Because perceptions of what is socially responsible and what is not can vary, mutual fund managers develop screens to appeal to different viewpoints and choose stock of firms that meet the criteria of the screen but also meet the criteria for firm/stock performance. Several empirical studies comparing the returns to socially responsible funds and unrestricted funds have found that there is no systematic difference (e.g., Bauer, Koedijk, & Otten, 2005 ; Hamilton, Jo, & Statman, 1993 ; Sauer, 1997 ). In a meta-analysis of earlier studies, Revelli and Viviani ( 2015 , p. 158) found that “the consideration of corporate social responsibility in stock market portfolios is neither a weakness nor a strength compared with conventional investments.” On average the returns to SRI funds are the same as the returns to unrestricted funds, making SRI funds attractive to both individual and institutional investors because they combine competitive financial returns with psychological benefits (feeling good about oneself for being socially responsible).

Other avenues for socially responsible investing include individual stocks (with the opportunity to engage directly with the corporation) and community development financial institutions which engage in socially responsible investing by providing loans to small businesses in low-income, at-risk communities who otherwise would not have access to financing (Schueth, 2003 ).

Corporate social responsibility is a well-researched and thoroughly discussed topic. While there is general consensus among researchers and commentators that corporations have responsibilities to society that go beyond profit maximization, what those responsibilities are and how they should be met are still open questions. Stakeholder theory, Carroll’s pyramid of corporate responsibilities, micro-economic theory of the firm, altruistic and strategic corporate social responsibility, corporate self-regulation, political corporate social responsibility, corporate environmentalism, and sustainability all offer insights into the responsibilities of corporations and how those responsibilities may be met.

When viewed from the perspective of the firm, the evidence of corporate social responsibility has generally been about the link between corporate social performance and financial performance or firm value, with mixed results. But financial effects are not the only effects of corporate social responsibility. Individuals experience psychological effects that are also a part of the social good created by socially responsible corporations. Researchers have reported significant effects, including:

Workers find meaning in their work and experience higher motivation, satisfactionm and commitment to the firm.

Consumers feel good about themselves.

Investors get a warm glow from supporting socially responsible firms.

We have abundant information about what is and isn’t corporate social responsibility, how corporate social responsibility benefits corporations and individuals, and how investors can encourage socially responsible corporations and discourage irresponsible corporations. However, we know less about how corporations can address social problems such as human rights, justice, poverty, and environmental sustainability and next to nothing about the record of corporate social responsibility in addressing such social problems.

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• Sheehy, B. (2019). CSR and environmental law: Concepts, intersections and limitations. In A. McWilliams , D. Rupp , D. Siegel , G. Stahl , & D. Waldman (Eds.), The Oxford handbook of corporate social responsibility: Psychological and organizational perspectives (pp. 263–282). Oxford: Oxford University Press.
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From there to here: 50 years of thinking on the social responsibility of business

It has now been 50 years since economist Milton Friedman asked and answered a fundamental question: What is the role of business in society?

Friedman’s stance was plain: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” That view has long influenced management thinking, corporate governance, and strategic moves. But more recently, many leaders have sought to expand that definition to consider all the stakeholders who stand to gain—or lose—from organizations’ decisions.

In 2019, Business Roundtable released a new “Statement on the purpose of a corporation,” signed by 181 CEOs who committed to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. The statement outlined a modern standard for corporate responsibility.

On the 50th anniversary of Friedman’s landmark definition, we look at how the conversation on corporate purpose  has evolved.

The pre-1970 conversation

Even before Friedman’s essay published, the social responsibility of business was a topic of discussion. McKinsey, for example, was part of the early conversation about corporate purpose, which centered on the idea of improving performance and a belief that healthier corporations meant a healthier society. The firm’s earliest formal expression of its objectives spoke of the value of “advancing the profitableness and welfare of American business and hence the welfare of the country as a whole” (1937).

The discussion of corporations’ role in society continued to unfold in the 1950s and 1960s, when Columbia University and McKinsey presented a lecture series in which executives discussed the challenges of large organizations. Many of those talks became books that addressed the issues Friedman would soon take on.

Friedman’s seminal 1970 essay

On September 13, 1970, when Friedman published his landmark piece, “The social responsibility of business is to increase its profits,” in the New York Times , he wrote:

In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.

Like many businesses and thinkers, McKinsey has grappled with such ideas over the years. A 1971 statement of the firm’s goals highlights the role of profitability but acknowledges that it isn’t the sole social responsibility of business; consultants can also “do worthwhile things for society as well as to earn substantial financial rewards.”

Marvin Bower—McKinsey’s managing director from 1950 to 1967, who remained a vocal leader even after stepping down—also continued to emphasize the importance of enduring business values, which could be translated into societal as well as business impact:

Outside the service for which we are compensated, each of us has an opportunity, through the firm, to serve the society of which [we are] a part. Our knowledge of the problem-solving process enables us to contribute disproportionately to the welfare of our communities.

The 1980s and 1990s: An expanded global view

Management attention started to go global in the 1980s. The business world examined how Japanese companies in particular were revolutionizing manufacturing to compete against once-dominant Western players. Political and social changes were also afoot, and the shift toward globalization took hold.

McKinsey managing director Fred Gluck (1988–94) called on the firm to raise its sights and expand its horizons:

Beginning with a memo not two weeks before the Berlin Wall came down, he urged his partners to expand their vision beyond their usual business clients. As the world’s best problem solvers, he argued, McKinsey should aspire to advise national and world leaders on global issues like poverty, European integration, and the environment. It should help design and implement the reforms that were certain to follow in the wake of the revolutions unfolding in Eastern Europe, the Soviet Union, and Asia. Though not universally shared, Gluck’s call to action struck a chord with many firm leaders. … They were being challenged to help change the world.

The McKinsey Global Institute was founded in this era, looking to generate fresh insights through serious research that integrated the disciplines of economics and management. And although work continued to prize financial impact for clients, the thinking around future impact continued to expand.

The 2000s and 2010s: A focus on longer-term, inclusive growth

Technological advances may have facilitated globalization, but the dot-com crash of the early 2000s and ensuing changes—to say nothing of the global financial crisis of 2008—brought discussion on the social responsibility of business into the zeitgeist.

In a 2006 interview, McKinsey’s former London office manager Peter Foy reflected:

I have real misgivings about the way that [business] changed. Because the minute the world … changed from building great companies and keeping shareholders happy to serving shareholders on a quarterly delivery, wealth-creation basis … you changed everything in the business system. The motivation of the CEO, and the organization, and the time you spend on it all.

The conversations also entered the realm of public ideas. One particularly powerful statement in the March 2011 Harvard Business Review article “ Capitalism for the long term ,” penned by McKinsey managing partner Dominic Barton, called for business-led reform to go beyond quarterly capitalism:

This shift is not just about persistently thinking and acting with a next-generation view—although that’s a key part of it. It’s about rewiring the fundamental ways we govern, manage, and lead corporations. It’s also about changing how we view business’s value and its role in society.

Barton later helped found the not-for-profit Focusing Capital on the Long Term, which encourages long-term investing and business decision making.

Additionally, the McKinsey Quarterly marked its 50-year anniversary  with a special edition on the future of management. One key theme: Corporate longevity and a long-term view of performance.

2019, the Business Roundtable statement, and what lies ahead

On August 19, 2019, the Business Roundtable issued its latest statement on the purpose of a corporation :

Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth. While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.

The statement was endorsed by 181 CEOs (along with McKinsey global managing partner Kevin Sneader ), each committing to leading their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders.

Echoes of that statement continue to resonate today, even as leaders navigate crises and contemplate the next normal beyond coronavirus . As Marc Goedhart and Tim Koller note in “ The value of value creation ”: “Long-term value creation can—and should—take into account the interests of all stakeholders.” And Sneader and his coauthors underscore it as a top-management ethos in a new article on the CEO moment :

[The] COVID-19 pandemic has laid bare the profound interconnectedness between businesses and the broader world in which they operate. … Employees, customers, and stakeholders expect a CEO to articulate where the company stands on critical issues.

What lies ahead on this topic? Write to us .

This article was conceptualized, illustrated, and edited by McKinsey Global Publishing colleagues Mike Borruso , Torea Frey , Gwyn Herbein ,  Philip Mathew , Janet Michaud , and Nathan Wilson , with Paul Lasewicz , our archivist, guiding us on this walk through history.

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What Is Corporate Social Responsibility (CSR)?

How Corporate Social Responsibility Works

Benefits of corporate social responsibility, frequently asked questions (faqs).

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Corporate social responsibility (CSR) is the business practice of joining environmental and social policies with a business’ economic goals and operations. It is based on the idea that businesses can reduce their adverse social and environmental impact on the world.

Key Takeaways

• Corporate social responsibility (CSR) involves actions taken when a company seeks to improve its environmental and societal impact.
• CSR also includes companies adopting fair and ethical business practices.
• Research suggests that a commitment to CSR can positively affect a company’s finances and employee morale.
• CSR is similar to ESG, a process by which investors make decisions based on CSR programs and a company's environmental impact.

Corporate social responsibility is a way of doing business that aims to increase a company's social impact while meeting business objectives such as growth and revenue goals. It can also refer to any effort to improve a company's eco-friendliness or carbon footprint. Companies can deploy CSR efforts as a standalone program or as part of a broader campaign.

Companies may create CSR programs that involve every part of their business and often have dedicated staff members and resources for CSR.

Types of Corporate Social Responsibility

In 1991, researcher Archie B. Carroll, came up with a 'pyramid of corporate social responsibility.' His pyramid included the four components of CSR – economic responsibility (make profits), legal responsibility (follow laws), ethical responsibility (be fair) and philanthropic responsibility (be charitable).

These components have evolved over time into the following types of CSR:

• Economic responsibility : According to Carroll, maximizing profits consistently was the firm's responsibility. Of course, that definition has evolved to include business practices that not only help maximize profits but help make an impact.
• Environmental responsibility : Efforts made by companies to adopt business practices keeping in mind their environmental impact. This could include companies committed to shirking their carbon footprint or working in other ways to mitigate adverse impacts of global warming and climate change.
• Ethical responsibility : Efforts made by companies to adopt fair and ethical business practices. That could mean anything from offering equal to or better than minimum wages to employees, to using ethically sourced raw material.
• Philanthropic responsibility : Some companies may opt to give away a portion of their earnings or executive time to charities or towards charitable causes. For example, in 1946, Target made a commitment to give away 5% of the company's profits back to the community.

Examples of Corporate Social Responsibility

CSR programs vary in scope, but a few examples might include:

• Giving to nonprofit groups, such as local food banks, by supplying volunteers or through monetary donations
• Offering job-training programs for those in need
• Pledging to ensure diversity in the workforce
• Focusing on shrinking the company’s carbon footprint through improved supply chain efficiency

For example, outdoor and sport apparel-maker Patagonia has a number of programs as a part of its CSR efforts. These include a living wage program, a migrant worker program, a fair trade program as well as a fair labor program among others.

Another example of a company's corporate social responsibility is Starbucks' commitment to global human rights. This commitment is spelled out in official corporate policy and includes compliance requirements across the firm's business units. From hiring to supply chain to the way the company works with its business partners, adhering to this social mission affects all levels of Starbucks' operations.

Though CSR programs are often the result of pressure from within the community , research shows that, once instilled, these programs often receive broad support from within the company, too.

One report found that 92% of S&P 500 and Russell 1000 companies published reports charting their efforts related to CSR and sustainability in 2020. In 2011, that figure was less than 20%.

There's little doubt that CSR programs should exist in every business. Companies with robust CSR programs can benefit from better public relations and have happier customers. Improved company profits usually result, in turn satisfying stakeholders.

In some cases, the positive financial impact of CSR is clear. For example, a shift toward renewable energy sources, like solar panels at corporate campuses, might result in lower electricity costs over time.

A report by Babson College reviewed hundreds of CSR program studies. The reviewers found that the programs can have a strong impact on a company's market value and brand and lower risk. The report's findings found that CSR programs have the potential to do the following:

• Increase market value by up to 6%
• Reduce systemic risk by up to 4%
• Reduce the cost of debt by 40% or more
• Raise price premium by up to 20%
• Reduce staff turnover rate by up to 50%

A lot of companies publish CSR reports and provide success metrics, however, it is very difficult to measure the actual impact of CSR activities beyond the numbers provided by the companies.

Corporate Social Responsibility vs. Environmental, Social, and Corporate Governance

CSR is similar to environmental, social, and corporate governance (ESG) principles. The leading difference is that CSR is an internal function, while ESG is an external one.

With CSR programs, it's up to those inside the company to measure the success of their actions. They decide which programs to continue, and rework those that aren't performing as well.

ESG, on the other hand, is a metric that outside analysts can use to compare the effect of different corporate efforts to address environmental and social issues.

Many investment groups gauge companies based on their pledge to integrate ESG criteria. Institutional investors and mutual fund companies may outline how ESG guidelines are incorporated into their philosophies in their annual reports.

The framework for ESG reporting stems from the Global Reporting Initiative (GRI), which is a private standards body that seeks to standardize corporate sustainability reporting. It has been working toward this goal since the late 1990s.

In 2006, the United Nations launched the Principles for Responsible Investment (PRI), a program that institutional investors can use to merge ESG values into their decision-making process. More than 3,000 investors and groups have signed on to the PRI, pledging to stand by ESG six principles.

Individual investors may want their investments to reflect their values. They can buy into mutual funds and exchange traded funds (ETFs), grouped by their commitment to CSR. Examples of this include the iShares MSCI KLD 400 Social ETF (DSI) and the SPDR SSGA Gender Diversity Index Fund (SHE).

Why is corporate social responsibility important?

Big businesses committing to social and environmental causes can make a big a difference. However, CSR is important for businesses not just because it is good for their brand. Research suggests that CSR can potentially help companies increase their market value, reduce systemic risks and even retain employees. A 2019 survey suggested that 77% of consumers were motivated to give their business to companies committed to making the world a better place.

What is mainly driving the move toward more corporate social responsibility?

Companies moving towards practices aligned with environment, social and governance (ESG) criteria one of the driving forces behind CSR in recent years. While ESG has its roots in CSR, ESG is more focused on driving environmental impact, sustainability , and positive changes towards social justice.

Harvard Business School. " 5 Examples of Corporate Social Responsibility That Were Successful ."

Archie B. Carroll. " The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders ," Pages 40-43.

Target. " 2021 Target Corporate Social Responsibility Report ," Page 11.

Patagonia. " Social Responsibility. "

Starbucks.com. " Global Human Rights Statement ."

Porter Novelli. " PN Purpose Tracker: Employee Perspectives on Responsible Leadership During Crisis ," Page 3.

Governance & Accountability Institute. " 92% of S&P 500® Companies and 70% of Russell 1000® Companies Published Sustainability Reports in 2020, G&A Institute Research Shows ."

Babson College. " Project ROI: Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability ," Page 3.

Global Reporting Initiative. " About GRI ."

Principles for Responsible Investment. " About the PRI ."

Aflac. " 2019 AFLAC CSR Survey ."

Dan Daugaard and Ashley Ding. "Global Drivers for ESG Performance: The Body of Knowledge."

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The Truth About CSR

• V. Kasturi Rangan,
• Lisa Chase,
• Sohel Karim

Despite the widely accepted ideal of “shared value,” research led by Harvard Business School’s Kasturi Rangan suggests that this is not the norm—and that’s OK. Most companies practice a multifaceted version of CSR that spans theaters ranging from pure philanthropy to environmental sustainability to the explicitly strategic. To maximize their impact, companies must ensure that initiatives in the various theaters form a unified platform. Four steps can help them do so:

Pruning and aligning programs within theaters. Companies must examine their existing programs in each theater, reducing or eliminating those that do not address an important social or environmental problem in keeping with the firm’s business purpose and values.

Developing metrics to gauge performance. Just as the goals of programs vary from theater to theater, so do the definitions of success.

Coordinating programs across theaters. This does not mean that all initiatives necessarily address the same problem; it means that they are mutually reinforcing and form a cogent whole.

Developing an interdisciplinary CSR strategy. The range of purposes underlying initiatives in different theaters and the variation in how those initiatives are managed pose major barriers for many firms. Strategy development can be top-down or bottom-up, but ongoing communication is key.

These practices have helped companies including PNC Bank, IKEA, and Ambuja Cements bring discipline and coherence to their CSR portfolios.

Most of these programs aren’t strategic—and that’s OK.

Idea in Brief

The problem.

Many companies’ CSR initiatives are disparate and uncoordinated, run by a variety of managers without the active engagement of the CEO. Such firms cannot maximize their positive impact on the social and environmental systems in which they operate.

The Solution

Firms must develop coherent CSR strategies, with activities typically divided among three theaters of practice. Theater one focuses on philanthropy, theater two on improving operational effectiveness, and theater three on transforming the business model to create shared value.

Companies must prune existing programs in each theater to align them with the firm’s purpose and values; develop ways of measuring initiatives’ success; coordinate programs across theaters; and create an interdisciplinary management team to drive CSR strategy.

Most companies have long practiced some form of corporate social and environmental responsibility with the broad goal, simply, of contributing to the well-being of the communities and society they affect and on which they depend. But there is increasing pressure to dress up CSR as a business discipline and demand that every initiative deliver business results. That is asking too much of CSR and distracts from what must be its main goal: to align a company’s social and environmental activities with its business purpose and values. If in doing so CSR activities mitigate risks, enhance reputation, and contribute to business results, that is all to the good. But for many CSR programs, those outcomes should be a spillover, not their reason for being. This article explains why firms must refocus their CSR activities on this fundamental goal and provides a systematic process for bringing coherence and discipline to CSR strategies.

• VR V. Kasturi Rangan is a Baker Foundation Professor at Harvard Business School and a cofounder and cochair of the HBS Social Enterprise Initiative.
• Lisa Chase is a research associate at Harvard Business School and a freelance consultant.
• SK Sohel Karim is a cofounder and the managing director of Socient Associates, a social enterprise consulting firm.

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5 Examples of Corporate Social Responsibility That Were Successful

• 06 Jun 2019

Business is about more than just making a profit. Climate change, economic inequality, and other global challenges that impact communities worldwide have compelled companies to be purpose-driven and contribute to the greater good .

In a recent study by Deloitte , 93 percent of business leaders said they believe companies aren't just employers, but stewards of society. In addition, 95 percent reported they’re planning to take a stronger stance on large-scale issues in the coming years and devote significant resources to socially responsible initiatives. With more CEOs turning their focus to the long term, it’s important to consider what you can do in your career to make an impact .

Access your free e-book today.

What Is Corporate Social Responsibility?

Corporate social responsibility (CSR) is a business model in which for-profit companies seek ways to create social and environmental benefits while pursuing organizational goals, like revenue growth and maximizing shareholder value .

Today’s organizations are implementing extensive corporate social responsibility programs, with many companies dedicating C-level executive roles and entire departments to social and environmental initiatives. These executives are commonly referred to as a chief officer of corporate social responsibility or chief sustainability officer (CSO).

There are many types of corporate social responsibility and CSR might look different for each organization, but the end goal is always the same: Do well by doing good . Companies that embrace corporate social responsibility aim to maintain profitability while supporting a larger purpose.

Rather than simply focusing on generating profit, or the bottom line, socially responsible companies are concerned with the triple bottom line , which considers the impact that business decisions have on profit, people, and the planet.

It’s no coincidence that some of today’s most profitable organizations are also socially responsible. Here are five examples of successful corporate social responsibility you can use to drive social change at your organization.

5 Corporate Social Responsibility Examples

1. lego’s commitment to sustainability.

As one of the most reputable companies in the world, Lego aims to not only help children develop through creative play, but foster a healthy planet.

Lego is the first, and only, toy company to be named a World Wildlife Fund Climate Savers Partner , marking its pledge to reduce its carbon impact. And its commitment to sustainability extends beyond its partnerships.

By 2030, the toymaker plans to use environmentally friendly materials to produce all of its core products and packaging—and it’s already taken key steps to achieve that goal.

Over the course of 2013 and 2014, Lego shrunk its box sizes by 14 percent , saving approximately 7,000 tons of cardboard. Then, in 2018, the company introduced 150 botanical pieces made from sustainably sourced sugarcane —a break from the petroleum-based plastic typically used to produce the company’s signature building blocks. The company has also recently committed to removing all single-use plastic packaging from its materials by 2025, among other initiatives .

Along with these changes, the toymaker has committed to investing $164 million into its Sustainable Materials Center , where researchers are experimenting with bio-based materials that can be implemented into the production process.

Through all of these initiatives, Lego is well on its way to tackling pressing environmental challenges and furthering its mission to help build a more sustainable future.

Related : What Does "Sustainability" Mean in Business?

2. Salesforce’s 1-1-1 Philanthropic Model

Beyond being a leader in the technology space, cloud-based software giant Salesforce is a trailblazer in the realm of corporate philanthropy.

Since its outset, the company has championed its 1-1-1 philanthropic model , which involves giving one percent of product, one percent of equity, and one percent of employees’ time to communities and the nonprofit sector.

To date, Salesforce employees have logged more than 5 million volunteer hours . Not only that, but the company has awarded upwards of $406 million in grants and donated to more than 40,000 nonprofit organizations and educational institutions.

In addition, through its work with San Francisco Unified and Oakland Unified School Districts, Salesforce has helped reduce algebra repeat rates and contributed to a high percentage of students receiving A’s or B’s in computer science classes.

As the company’s revenue continues to grow, Salesforce stands as a prime example of the idea that profit-making and social impact initiatives don’t have to be at odds with one another.

3. Ben & Jerry’s Social Mission

At Ben & Jerry’s, positively impacting society is just as important as producing premium ice cream.

In 2012, the company became a certified B Corporation , a business that balances purpose and profit by meeting the highest standards of social and environmental performance, public transparency, and legal accountability.

As part of its overarching commitment to leading with progressive values, the ice cream maker established the Ben & Jerry’s Foundation in 1985, an organization dedicated to supporting grassroots movements that drive social change.

Each year, the foundation awards approximately $2.5 million in grants to organizations in Vermont and across the United States. Grant recipients have included the United Workers Association, a human rights group striving to end poverty, and the Clean Air Coalition, an environmental health and justice organization based in New York.

The foundation’s work earned it a National Committee for Responsive Philanthropy Award in 2014, and it continues to sponsor efforts to find solutions to systemic problems at both local and national levels.

Related : How to Create Social Change: 4 Business Strategies

4. Levi Strauss’s Social Impact

In addition to being one of the most successful fashion brands in history, Levi’s is also one of the first to push for a more ethical and sustainable supply chain.

In 1991, the brand created its Terms of Engagement , which established its global code of conduct regarding its supply chain and set standards for workers’ rights, a safe work environment, and an environmentally-friendly production process.

To maintain its commitment in a changing world, Levi’s regularly updates its Terms of Engagement. In 2011, on the 20th anniversary of its code of conduct, Levi’s announced its Worker Well-being initiative to implement further programs focused on the health and well-being of supply chain workers.

Since 2011, the Worker Well-being initiative has been expanded to 12 countries and more than 100,000 workers have benefited from it. In 2016, the brand scaled up the initiative, vowing to expand the program to more than 300,000 workers and produce more than 80 percent of its product in Worker Well-being factories by 2025.

For its continued efforts to maintain the well-being of its people and the environment, Levi’s was named one of Engage for Good’s 2020 Golden Halo Award winners, which is the highest honor reserved for socially responsible companies.

5. Starbucks’s Commitment to Ethical Sourcing

Starbucks launched its first corporate social responsibility report in 2002 with the goal of becoming as well-known for its CSR initiatives as for its products. One of the ways the brand has fulfilled this goal is through ethical sourcing.

In 2015, Starbucks verified that 99 percent of its coffee supply chain is ethically sourced , and it seeks to boost that figure to 100 percent through continued efforts and partnerships with local coffee farmers and organizations.

The brand bases its approach on Coffee and Farmer Equity (CAFE) Practices , one of the coffee industry’s first set of ethical sourcing standards created in collaboration with Conservation International . CAFE assesses coffee farms against specific economic, social, and environmental standards, ensuring Starbucks can source its product while maintaining a positive social impact.

For its work, Starbucks was named one of the world’s most ethical companies in 2021 by Ethisphere.

The Value of Being Socially Responsible

As these firms demonstrate , a deep and abiding commitment to corporate social responsibility can pay dividends. By learning from these initiatives and taking a values-driven approach to business, you can help your organization thrive and grow, even as it confronts global challenges.

Do you want to gain a deeper understanding of the broader social and political landscape in which your organization operates? Explore our three-week Sustainable Business Strategy course and other online courses regarding business in society to learn more about how business can be a catalyst for system-level change.

This post was updated on April 15, 2022. It was originally published on June 6, 2019.

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Definitions of Social Responsibility

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• Brigitte Planken 5  

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Introduction

Social responsibility is the ideological notion that organizations should not behave unethically or function amorally, and should aim (instead) to deliberately contribute to the welfare of society or societies – comprised of various communities and stakeholders – that they operate in and interact with. As such, the notion of social responsibility is effectively taken to apply to all and any organizational entities, whether a government, a corporation, and institution, or an individual, dealing with society at large when conducting core (commercial) activities. In recent decades, however, social responsibility has come to be acknowledged as particularly relevant in relation to corporate behavior, that is, in relation to the way in which businesses and managers behave and conduct themselves in societal relationships, and the extent to which these actors commit themselves to socially oriented initiatives aimed at improving the quality of life in and overall well-being of...

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Dr. Brigitte Planken ( Associate Professor )

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Liangrong Zu

Indian Institute of Plantation Management, Bangalore, India

Ananda Das Gupta

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Planken, B. (2013). Definitions of Social Responsibility. In: Idowu, S.O., Capaldi, N., Zu, L., Gupta, A.D. (eds) Encyclopedia of Corporate Social Responsibility. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-28036-8_476

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Corporate Governance and Corporate Social Responsibility Essay (Critical Writing)

Introduction.

Corporate social responsibility (CSR) is a form of corporate self-regulation incorporated into the business, which functions as an instrument by which a corporation examines and ensures its active conformity with the provisions of the law, ethical norms, and global practices.

The main role of social initiatives is to uphold responsibility and promote a positive impact through its conduct towards the environment, customers, staff, the immediate community, and all members of the public domain (Pearce & Robinson, 2011). In addition, CSR actively promotes the community’s growth and development, and eradicates norms that harm the public, irrespective of legality.

Although there is no single universally accepted definition of CSR, it can be summarized as the intentional inclusion of public interest into corporate decision-making processes, and the honoring of the three corporate pillars: people, planet, and profit.

CSR ensures that a corporation goes beyond its normal requirements so as to handle staff with dignity, operate with integrity and ethics, respect human rights, sustain the environment for future generations, and be responsible in the community (be a good ‘corporate citizen’).

A study conducted by the Fleishman –Hillard in association with the National consumers League came up with the following results regarding the importance of CSR:

From the table, it is evident that CSR programs are very important towards communities and the corporation’s staff.

On the other hand, corporate governance generally refers to the rules, processes, or laws by which corporations are managed, regulated and controlled, and can refer to the internal processes agreed upon by the officers, stockholders or constitution of a corporation, as well as external forces such as consumer groups, customers, and government directives (Brown and Dacin, 1997, pp. 81).

A fundamental theme of corporate governance is the nature and extent of responsibility and accountability of specific individuals in the corporation’s hierarchy, and mechanisms that attempt to eliminate or mitigate the problems that arise due to a lack of corporate governance (Freeman and Jeannen, 1991, pp. 122).

A clearly defined and implemented corporate governance provides a structure that benefits all stakeholders and ensures that the corporation holds onto standard ethical norms and best practices in addition to the formal laws.

Their has been a recent focus on corporate governance among international firms due to the high-profile scandals involving misuse of corporate power that have at times led to the collapse of these corporations. Some of these corporate scandals include the Enron Corporation scandal of 2001 and MCI Inc (previously WorldCom) scandal.

The scandals led to the collapse of these corporations and reminded governments and corporations of the significance or corporate governance. A primary element of corporate governance includes provisions for civil or criminal prosecution of staff who are found guilty of unethical and/or illegal activities due to the power bestowed upon them by the corporation (Gobe, 2002, pp. 12).

Both corporate governance and corporate social responsibility are becoming increasingly important to organizations, governments, and service providers as they strive to meet the challenges of social and economic problems while altering welfare environments and this can be attributed to a number of factors, economic, social, cultural, and legal, and so on.

However, progress in these two areas is often hampered by the fact that the fields are under researched even as corporations face new demands to improve their accountability, transparency, integrity and ethical behavior while observing the interests of its staff and that of the general public (Pearce & Robinson, 2011, pp. 5).

The paper will present a critical analysis of factors that have led many international firms to focus on corporate social responsibility and corporate governance in recent years.

Factors that have led to the increase of Interest in corporate social responsibility and corporate governance

Economic factors.

The importance of corporate governance lies in its contribution both to the success of the business and to accountability. Companies that have embraced corporate governance, mostly public companies, are today regarded as the most accountable companies.

They make their trading results public, and they are required to disclose as much information as possible about their dealings, relationships, remuneration and government arrangements. The importance of accountability was evident in the prosperity made by Cadbury Inc.

However, business prosperity cannot be forced or commanded, it requires the collective contribution of people through teamwork, effective leadership, enterprise, experience and skills (Cochran and Wood, 1984, pp. 43).

There is no single strategy for bringing these elements together, and it is risky to encourage the notion that rules and regulations on structure will automatically deliver success. On the other hand, accountability must be accompanied by rules and regulations, in which disclosure is the central facet.

Therefore, since corporate governance emphasizes on accountability, an international corporation or business will be able to bring together the above-mentioned elements to ensure prosperity in its operations in various locations around the world (Pearce & Robinson, 2011, pp. 122).

Rules and regulations instituted by the committee at the home country are relayed across all divisions, branches and franchises around the world and this results in success in these individual locations, and of the international organization in general.

Besides, good corporate governance can considerably reduce malpractice and fraud in an organization, although it cannot totally eliminate them.This reduces financial losses incurred by the organization whenever such malpractices occur.

A final economic factor that has made international organization increase their interest in corporate governance is related to confidence among investors.

Logically, a very small number of investors will be attracted to an organization that offers weak investor protection, however, for an organization that embraces corporate governance, investor confidence levels are up and this has the potential of attracting investors and raising extra cash through activities such as public listing, sale of shares, stocks, debentures, and so on (Cooper, 2004, pp. 76).

In a similar fashion CSR is of great importance to the economic success of any business organization, be it local or international. CSR not only involves doing the right thing(s), it entails responsible conduct, and also dealing with suppliers, distributors and other constituents of the supply chain network who do the same.

When a corporation implements CSR programs, then this can become known by the customers, suppliers and the local community.

This publicity can contribute significantly to the business in terms of winning contracts. Besides, customers often want to buy from corporations and businesses that are responsible in the way they treat them and in general those corporations that conduct their activities in in an ethical manner as dictated by the CSR policies.

Some clients do not only prefer to deal with responsible corporations, they insist on it (McWilliams and Siegel, 2000, pp. 608). For instance, the Co-operative Group, a consumer co-operative in the UK, attaches a significant importance on its CSR and publishes in depth reports on its performance on a wide range of measures, from animal welfare to the quantities of salt in its pizzas.

And in a study conducted in 2001 by Hill & Knowlton/Harris Interactive showed that 79 per cent of US citizens take into account CSR practices in their decision to buy from a given company. Overall, 36 per cent of those interviewed believe that CSR is a primary factor in deciding to buy a product.

Indeed, 91 per cent of the respondents said that they will switch loyalty to another company if the company has a negative image (Gobe, 2002, pp. 96). In another study conducted by The Aspen Institute Initiative for Social Innovation through Business among students, more than 50 per cent of the respondents said that they would quit their positions if the corporation did not support their values.

In conclusion, CSR programs increase a company’s sales turnover and thereby increases the returns on investments (ROI) besides improving cash flows. Therefore, corporations that implement CSR programs achieve more economic growth and become more competitive in the rapidly changing international business environment (Herremans et al. 1993, pp. 689).

Social factors

The importance of effective CSR strategies and corporate governance in the social spheres cannot be overemphasized. The role that businesses can play in the development of society is very important, and has been underestimated at times.

In fact, the activist community has been very instrumental in pushing organizations to implement CSR programs and corporate governance, and most of these programs are implemented with an aim of improving the organization’s image in the eyes of the public.

In other words, businesses and organizations introduced CSR reports and programs to reduce the damage inflicted on their activities and reputation by attacks from activist social groups who benefitted from 24-hour news media that mainly focus on corporate misconducts.

While, on one hand, this makes a captivating news item, it puts pressure on corporations to give back part of their wealth to society in return for what they have obtained from it (McWilliams and Siegel, 2000, pp. 608). Hence, it not just important for organizations to make profits, the way the profit is made and how it is used is a deep concern for social activists and the general public (Pearce & Robinson, 2011, pp. 75).

An organization must not be seen to be engaging in unethical or illegal practices in any area of its operations such as market conduct, trade policies, staff relations, obtaining raw materials, human rights, and environmental laws.

Whenever any of these offences are detected or observed in any organization, the activists put pressure on them through various forms of media and other channels such as boycotts, sabotage, and protests (Burke and Logsdon, 1996, pp. 501).

Therefore, in implementing CSR programs, a company aims to improve its image and this results into numerous advantages such as increase in sales of the organization’s products and the ability to attract and retain competent staff.

Indeed, a study conducted in 2008 by the Grant Thornton Grant Thornton International Business Report (IBR) revealed the desire to recruit and retain staff is one of the major drivers of CSR as shown below.

CSR also help a corporation differentiate itself by creating a strong corporate brand through CSR programs. Even among competitors, CSR can be significant in helping a corporation stand out. For instance, Wal-Mart, an international corporation, is famous as a business owned by its workers. Its CSR activities are directed to customer service, sales and profits.

Corporate governance also has a similar effect of improving the company’s image in the eyes of the public. The primary role of corporate governance is its transparency and accountability principles. An advantage of corporate governance is that its benefits, or the outcome of failing to implement it, can be assessed and measured by the public.

For instance, when Enron Corporation failed to fix poor financial reporting and a lack of conformation to standard accounting principles, the outcome was evident to all: the bankruptcy of the corporation. On the positive end, companies such as Coca Cola have continued to win public support due to their strong corporate governance policies (McWilliams and Siegel, 2000, pp. 607).

Legal Factors

Another reason for the increasing interest of international corporations in corporate governance and CSR is the need to conform to legal provisions and requirements. Central and state labor offices investigate compliance with all matters pertaining to employment such as wages, working conditions, working hours, discrimination, child labor and other human rights violations, and so on (Linton et al, 2004, pp. 230).

Other authorities also investigate issues pertaining to the environment with respect to the operations of the operations such as environmental pollution and degradation, use of toxic substances in the manufacture of products meant for human consumption, use of non-biodegradable materials, and so on.

These organization fine companies found to be flouting any rules, and in serious situations, such organizations can be shut down temporarily or permanently (Herremans et al. 1993, pp. 704). Other punishments may include profit disgorgement from firms found to be selling goods obtained from corporations that do not comply with the legal requirements.

However, implementing and monitoring CSR programs and corporate governance policies can be significant in helping a corporation comply with the various regulatory requirements, especially in an international market where the management may not have adequate information regarding the requirements.

Implementing a CSR aimed at ensuring that staff works in humane conditions and the wages equal or exceed the minimum wage requirements. Such a move can ensure that the firm does not violate legal requirements relating to these issues (Pearce & Robinson, 2011, pp. 56).

Other business processes that may lead to legal action against the corporation include the failure to have an effective Foreign Corrupt Practices Act compliance program and this may result into investigation and if found guilty, the corporation may be fined millions of dollars.

Insufficient knowledge of the corporation’s supply chain may result in the use of an unauthorized contractor, leading to hefty fines. Besides, corporations that do not sufficiently monitor suppliers’ product safety systems can be sued (Brown and Dacin, 1997, pp. 75).

With a strong CSR program that is employee focused in place, legal actions relating to staff discrimination, abuse, or issues relating to wages can be mitigated.

A customer and environment oriented CSR program can lead to an improvement of product safety and use of green technologies in manufacturing processes that ensure environmental protection and compliance to environmental laws both at home and in international locations.

Similarly, corporate governance policies can result in transparency regarding the corporation’s handling of issues relating to staff, production methods, supply chain processes, and so on.

This may result in a review and evaluation of these policies by external persons and bodies and this may assist a corporation in identifying areas that have not conformed to the legal provisions in the country of operation (McWilliams and Siegel, 2000, pp. 607).

Cultural Factors

The influence of culture in setting CSR programs and corporate governance policies is considerable. International corporations such as Bayer AG are known for having a culture of corporate citizenship dating back more that a century ago.

For example, the company has supported community sporting activities since the early 20 th century, the most evident of these activities is its supporting of Bayer 04 Leverkusen soccer club, which it has supported since 1904 to date. Bayer AG has continued with its corporate citizenship activities through the support of disabled athletes, evident during the Beijing Olympics in 2008 (Bayer, 2011, para. 3).

Cultural influence to implementing corporate citizenship policies are seen when a corporation moves into a country or community where specific aspects of business operations and values are observed.

For example, when Coca Cola began production of its products in the Saudi Arabian market in 1988, it had to conform to the Muslim ways of doing business and in the process, embraced CSR activities aimed at fulfilling its corporate citizenship objectives (McWilliams and Siegel, 2000, pp. 605).

These shifts included the use of decently dressed persons in its advertisements to reflect the Muslim tradition and use of halaal materials in its production processes. Incidentally, these activities represented people-directed CSR activities in respect of their tradition and culture. The company also embraced corporate governance principles such as ethical and transparent accounting procedures.

Both corporate governance and corporate social responsibility are very important towards the overall success of a business entity operating in numerous countries. These two aspects of large organizations are important in a number of business processes and can be used as marketing, tools.

Economically, corporate governance enables firms to bring together elements of business success such as teamwork, effective leadership, enterprise, experience and skills. Besides, good corporate governance can considerably reduce malpractice and fraud in an organization and improve investor confidence. Customers other groups in the supply chain network prefer to deal with companies that embrace CSR.

Socially, in implementing CSR programs and embracing corporate governance, a company can improve its public image and this results into numerous advantages such as increase in sales of the organization’s products and the ability to attract and retain competent staff.

CSR and corporate governance are important in legal spheres as they ensure that a corporation conforms to the legal requirements in the country if operation regarding wages, workplace conditions, discrimination, environmental issues, product manufacturing processes, and supply chain networks, among others.

CSR and corporate governance can also be of importance in conforming to the culture and traditions of a community, or the country in general.

Bayer. (2011). Social Initiatives: Working on behalf of a better life . Web.

Brown, T. J., and Dacin,. P. A. (1997). The Company and the Product: Corporate Associations And Consumer Product Responses. Journal of Marketing , Vol. 61, No. 1, pp. 68-84.

Burke, L., and Logsdon, J. M. (1996). How Corporate Social Responsibility Pays Off. Long Range Planning , Vol. 29, No. 4, pp. 495- 502.

Cochran, P. L., and Wood, R. A. (1984). Corporate Social Responsibility and Financial Performance . The Academy of Management Journal , Vol. 27, No. 1, pp. 42-56.

Cooper, S. (2004). Corporate Social Performance: A Stakeholder Approach . Ashgate: Burlington.

Freeman, R. E., and Jeannen, L. (1991). Corporate Social Responsibility: A Critical Approach . OH: Business Horizons.

Gobe, M. (2002). Citizen Brands . New York: Allworth Press.

Herremans, I. M., Akathaporn, P. and McInnes, M. (1993). An Investigation of Corporate Social Responsibility Reputation and Economic Performance. Accounting Organizations and Society , Vol. 18, No. 7/8, pp. 687-705.

Linton, A., Liou, C. C. and Shaw, K. A. A (2004). Taste of Trade Justice: Marketing Global Social Responsibility via Fair Trade Coffee. Globalizations, Vol. 1, No. 2, pp. 223-246.

McWilliams, A., and Siegel, D. (2000). Corporate Social Responsibility and Financial Performance: Correlation or Misspecification? Strategic Management Journal , Vol. 21, No. 5, pp. 603-609.

Pearce, J. A., & Robinson, R. B. (2011). Strategic management: Formulation, implementation, and control. (12th ed.). Boston: McGraw-Hill/Irwin.

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• Original article
• Open access
• 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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Tilt, C.A. Corporate social responsibility research: the importance of context. Int J Corporate Soc Responsibility 1 , 2 (2016). https://doi.org/10.1186/s40991-016-0003-7

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Received : 14 March 2016

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Published : 05 July 2016

DOI : https://doi.org/10.1186/s40991-016-0003-7

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• Corporate social responsibility
• Corporate environmental reporting
• State capitalism
• Developing countries
• Middle East

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Global Corporate Social Responsibility

Defining csr, teaching csr, environmental justice and csr, bibliography.

• O'Riordan, L., & Fairbrass, J. (2008). Corporate social responsibility (CSR): Models and theories in stakeholder dialogue. Journal of Business Ethics, 83(4), 745-758.
• Rothbardt, J. L. (2012). Applicant attraction to socially responsible organizations: The moderating effect of core self-evaluation. Doctoral Distertation, St. Ambrose University, 1-70.
• World Business Council of Sustainable Development. (1998, September). WBCSD - Corporate Social Responsibility. Retrieved July 11, 2011, from World Business Council for Sustainable Development (WBCSD): http://www.wbcsd.org/DocRoot/hbdf19Txhmk3kDxBQDWW/CSRmeeting.pdf
• Zhang, L. (2007). Corporate social responsibility, applicants' ethical predispositions and organizational attraction: A person-organization fit perspective. (Doctoral Dissertation, The George Washington University, 2007), 148 pages; AAT 3288923.
• Zhang, L., & Gowan, M. (2008). Corporate social responsibility, applicants' ethical predispositions and organization attraction. Academy of Management Annual Meeting Proceedings, (pp. 1-6).

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Corporate Social Responsibility (csr)

• Categories: Corporate Social Responsibility Structure

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Published: Sep 25, 2018

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Introduction, types of csr, importance of csr.

• Environment-Focused Corporate Social Responsibility (CSR) This type of CSR focuses on reducing detrimental effects of the corporation’s operations on the environment. The corporation innovates in its manufacturing stage to reduce the production of environment harming by-products. It also promotes the use of non-renewable energy sources to prevent harm caused to the environment by burning of fossil fuels.
• Community-Based Corporate Social Responsibility (CSR) The corporation joins hands with other organizations (usually Non-Profit ones) to ensure the welfare of a local community’s people. These organizations either fund or receive funding from corporations to perform tasks that can improve the living conditions of the community’s people.
• Human Resource (HR)-Based Corporate Social Responsibility (CSR) Corporations focus on the well-being of their own staff and improve their living conditions. The companies may extend compassionate leaves like paternity leaves so that the employee can look after his newborn. They can also provide medical insurance to their employees to take care of accidents caused due to occupational hazards.
• Charity Based Corporate Social Responsibility (CSR) In a charity-based CSR, corporations donate to organizations or individuals (usually through a charity partner) to improve their financial condition and for their general upliftment. This is the most common form of a CSR activity. Most corporations provide direct financial support to organizations or individuals who require such assistance.
• Increased employee’s loyalty and retention.
• Gaining legitimacy and access to markets.
• Less litigation
• Increased quality of products and services.
• Bolstering public image and enhanced brand value.
• Less volatile stock market.
• Avoiding state regulations.
• Increased customer loyalty.
• Improved quality of life and changing habits.
• Capacity building creates wealth and employment.
• Balanced eco-system.
• Waste management.
• Clean and green environment

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