To what extent is Corporate Social Responsibility CSR beneficial to a company s performance
To what extent is Corporate Social Responsibility (CSR) beneficial to a company’s performance?
1. Introduction
As the magnitude of social and environmental implications of corporate activities is being recognised, there has been growing interest in corporate social responsibility (CSR). Business for Social Responsibility (BSR) defines CSR as “achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment.” Over 90% of the Fortune 500 companies engage in CSR, and CSR investments amount to substantial proportions of many of these companies’ profits (Luo & Bhattacharya, 2006). CSR concerns not only the stakeholders in the social and environmental dimensions, but is potentially decisive to a company’s performance. Hence, companies view it as a strategic tool that can play a crucial role in profit maximisation (Hartmann, 2011).
The effects of CSR on company performance have been widely debated and covered in literature. Although the results are not always conclusive due to the difficulty in measuring the impact of CSR alone on companies’ profits, correlations are generally found to be positive to non-significant (Reinhardt & Stavins, 2010). CSR has been found to affect consumer perception of a company, employee satisfaction and company costs, all of which directly affect company performance. In the following sections, effects of CSR on three major parameters of company performance, namely revenue, productivity and cost, will be analysed. This will be followed by a discussion of the limitations and conditions for CSR benefits to be realised.
2. Impacts of CSR on company performance
2.1 Revenue
CSR plays an integral part in affecting customers’ perception of a company, a factor that directly affects the revenue of the company. A study by Reputation Institute reveals that almost half of consumers’ trust and feelings about a company are derived from its CSR reputation (Smith, 2013). Hence, actively engaging
1. Introduction
As the magnitude of social and environmental implications of corporate activities is being recognised, there has been growing interest in corporate social responsibility (CSR). Business for Social Responsibility (BSR) defines CSR as “achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment.” Over 90% of the Fortune 500 companies engage in CSR, and CSR investments amount to substantial proportions of many of these companies’ profits (Luo & Bhattacharya, 2006). CSR concerns not only the stakeholders in the social and environmental dimensions, but is potentially decisive to a company’s performance. Hence, companies view it as a strategic tool that can play a crucial role in profit maximisation (Hartmann, 2011).
The effects of CSR on company performance have been widely debated and covered in literature. Although the results are not always conclusive due to the difficulty in measuring the impact of CSR alone on companies’ profits, correlations are generally found to be positive to non-significant (Reinhardt & Stavins, 2010). CSR has been found to affect consumer perception of a company, employee satisfaction and company costs, all of which directly affect company performance. In the following sections, effects of CSR on three major parameters of company performance, namely revenue, productivity and cost, will be analysed. This will be followed by a discussion of the limitations and conditions for CSR benefits to be realised.
2. Impacts of CSR on company performance
2.1 Revenue
CSR plays an integral part in affecting customers’ perception of a company, a factor that directly affects the revenue of the company. A study by Reputation Institute reveals that almost half of consumers’ trust and feelings about a company are derived from its CSR reputation (Smith, 2013). Hence, actively engaging