Corporate social responsibility does not generally increase profitability. And when corporate executives only implement acts of corporate responsibility that promote profits, and only as much of these activities as promotes profits, they are just being profit-minded, not responsible. This is in fact profitability in the guise of CSR. The correct way of approaching the issue of corporate social responsibility, is to first ask what a company is responsible for, and then implement these responsibilities, whether they increase profits or not. And in some cases they will certainly cut into the bottom line. There is thus a very real possibility that corporations should in certain cases deviate from profit maximization, from maximizing returns to owners, to pursue ends that are more important from a social point of view.
I would connect the firm's responsibility (which is a broader concept than how CSR is usually understood in practice) to business continuity or interruption. A company that ignores their responsibilities to society could ultimately suffer penalties /when regulations are violated) or closures.
For example, an alcohol distillery may choose to dump their waste in the rivers and pollute the water that the community relies for their water supplies, or take a responsible approach to managing their waste.
In the first case, the company may sooner or later encounter direct actions from the communities that may result in heavy penalties, or even closure. This action has a direct effect on profits and the longevity of the business.
In the second case, waste may be recycled and with the use of waste management technologies, there is a possibility that the waste could be converted into useful products that could create a new revenue stream.
In the end, we cannot take a blinkered view that something that is profitable is to the detriment of society, or being socially responsible is a sunk cost. The two are actually compatible - doing good and doing well.
Hi Sanjeev, I respectfully disagree with your assertion that "Corporate social responsibility does not generally increase profitability". Can you provide us with any proof or evidence to support that?
On the other hand, there is plenty of anecdotal evidence to support a positive correlation between the two. Attached is a link to a story about that:
"Customers typically regard the products' greenness as an added value or among many factors they consider, says Jennifer Young, a marketing manager for Pioneer Millworks"
"Officials from other Rochester-area companies with green marketing strategies echo Young: Going green does not make customers' other wants and needs disappear, but it can be an important secondary selling point."
I believe that "secondary selling point" is what links CSR efforts to profitability.
-Steve
http://www.rbj.net/mobile/article.asp?aID=185356
Indeed a relationship exists between the social corporate responsibility and the benefits. Some times more evident than others. Not alone it is about the environmental management responsibility, in those that the benefits are very clear when avoiding the contamination of rivers or to reduce the consumptions of materials, energy and water or to transform the residuals into inputs for other productive processes.
Other areas of social influence exist in those that the corporate responsibility is strategic, for example, the education, the health and the social security. It not alone it produces benefits in the medium term, but it also reinforces the corporate image attracting more and more clients. JADD
https://www.researchgate.net/publication/276136711_New_Tools_to_Capture_the_Elusive_Green_Consumer_Reviving_a_Revolution
This paper may provide some framework for incorporating ethical investments principles as part of your mainstream strategy.
Article New Tools to Capture the Elusive Green Consumer: Reviving a Revolution
If a long term view is held to profit maximization, then CSR and fair practices is the way to be. It adds to the soft and concrete bottom line of the company. Several studies prove a positive relationship between CSR and financial performance of the companies
I think this whole topic gets interesting is when firms:
The Friedman paper attached is perhaps the best argument for Sanjeev's case. The MIT paper attached in my opinion gives some of the best arguments why we have moved beyond Friedman's outdated view.
-Steve
In my view there do exist relation between CSR activities and bottom line of a company, may be in long- term , but relation is evident. CSR activities are no longer mandate by government, but a strategy of company to make its presence feel in economy. Thus, with this, it' doesn't only come in good books of society, but it is also a medium of marketing themselves via social good. Benefits could be numerous- wider customer base, goodwill build-up, marketing, trust of shareholders, employee loyalty etc. There's nothing free lunch in world, hence every action is targeted to reap out some monetary or even non-monetary benefit to organisation. Even though it seems to be an added pressure on bottom line, but in long-term it enhances it.
But, whatsoever the aim may be, the betterment of society should not be undermined and these activities have actually achieved their feat. Numerous activities ranging from pollution control to healthcare facilities to wildlife protection to awareness campaigns etc. have indeed contributed positively to society and environment. It has settled down the long debated topic of ethnicity in business conduction as CSR activities have promoted public belief in social contributions by businesses against resources used by them. Companies too have realized that they can't run away from their social responsibilities and its better to transform.
Therefore, I would conclude by saying that it's a win-win situation for businesses and society as there might be some monetary interests of companies, but their contribution to society cannot be overlooked.
INSEAD article "Increase Revenues with CSR":
http://knowledge.insead.edu/csr/social-entrepreneurship/increase-revenues-with-csr-2572
Garriga and Mele (2004) suggest some "instrumental theories", where the economic issue is the main driver for Business and society relationship.
I hope this can help
good luck
silvana
From the way you frame your query, it appears to me that you would delineate two activities that are in reality part of a continuum: For profit initiatives that falls under the economic remit of enterprises; and Non-profit activities that are associated with CSR.
In my paper on green procurement, a copy of which you can download from my page at ResearchGate, I argue that economic factors drive decision-making on procurement. In effect, the social branding of an enterprise or its products go hand in hand with the economic merits of their offerings. While in the past, green attributes that are often associated with what are socially responsible attributes, should also offer the economic attributes that make them attractive to purchasers or consumers.
That is, the dichotomy between economics and "social responsibility" is perhaps causing the artificial delineation that renders a number of CSR initiatives adjunct to the CEO's agenda, rather than sitting at the core corporate strategy.
Previous studies reported inconclusive, and in some cases even contradictory, results for the relationship between CSR and financial performance, pointing in different causal directions (e.g., Marom, 2006; McWilliams & Siegel, 2000; Waddock & Graves, 1997; Wang, Choi, & Li, 2008).
Marom, I. Y. 2006. Toward a unified theory of the CSP–CFP link. Journal of Business Ethics, 67: 191-200.
McWilliams, A., & Siegel, D. 2000. Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21: 603-609.
Waddock, S. A., & Graves, S. B. 1997. The corporate social performance–financial performance link. Strategic
Management Journal, 18: 303-319.
Wang, H., Choi, J., & Li, J. 2008. Too little or too much? Untangling the relationship between corporate philanthropy and firm financial performance. Organization Science, 19: 143-159.
I believe the CSR-profit relationship is still an unresolved puzzle (Forget, V.D. Doing Well and Doing Good: A Multidimensional Puzzle, 2011. Available at SSRN: https://ssrn.com/abstract=1946996 or http://dx.doi.org/10.2139/ssrn.1946996)
Some authors believe that CSR leads to creating shared value (Kramer, M.R.; Porter, M. Creating shared value Harvard business review, 2011, Available online: http://hbr.org/2011/01/the-big-idea-creating-shared-value), but they have been partially contested (Crane, Andrew , Guido Palazzo, Laura J Spence, and Dirk Matten Contesting the Value of "Creating Shared Value" 56/2 ,Winter 2014: 130-153).
So I have a dilemma: there is a correlation or a connection between CSR and profit?
Thanks a lot Camelia for the wonderful papers link.............Really there exists aa dilemma in this context.
All else equal, most consumers prefer to purchase from brands that are socially responsible versus those that are not. Although we are not the first to do it, my co-authors and I found that a reputation for CSR improves corporate profits.
Article Self-Reporting CSR Activities: When Your Company Harms, Do Y...
There are a many reasons why CSR directly affects profits. In our recent article published in the Journal of Consumer Psychology, my co-authors and I demonstrated that a reputation for CSR motivates consumers to reciprocally help a company that has benefited consumers.
Article Good Guys Can Finish First: How Brand Reputation Affects Ext...
These articles fall beneath one of my research streams that investigates how CSR affects brands and consumer decision making.
https://www.researchgate.net/project/Social-Responsibility-implications-for-consumers-brands
- Badges
- Science topic
- Similar topics
- Papers