It yielded encouraging data suggesting a positive link between CSR and increased profits. The study, “Corporate Social and Financial Performance: A Meta-Analysis,” was compiled by researchers Marc Orlitzky, Frank L.
A meta-analysis on CSR and its link to profits won the famed socially responsible investing, Moskowitz Prize in 2004. But by using the technique of ‘meta-analysis,’ many studies can be statistically analysed to determine collective results. However, reviewing individual empirical studies can be confusing. The researchers found that, “For consumer industries, greater CSP is associated with better CFP, and the opposite is true for industrial industries… Empirical studies have examined the relation between CSR and corporate financial performance, and while the results are mixed, overall the research has found a positive but weak correlation.” Harjoto, and Hoje Jo, published on April 21, 2009. In her thesis, “ Economic Implications of Corporate Social Responsibility and Responsible Investments,” at the University of Gothenburg’s School of Business, Economics and Law, Sweden, she wrote on Decemthat, “the results reveal that CSR activities do not generally have a negative effect on profitability, but that in the few cases where they have a positive effect, this effect is rather small.” Other studies add further perspectives.ĭefining the experience of CSR in relation to different industries is this study, “The Economics and Politics of Corporate Social Performance” by David P. The most recent study on this subject is by Cristiana Manescu. The study of CSR and its relation to corporate profits is growing. Corporate citizens are accountable not just to shareholders, but also to stakeholders such as employees, consumers, suppliers, local communities and society at large.” In the above quoted EIU study, it provides the following definition of CC: “corporate citizenship is defined as transcending philanthropy and compliance, and is addressing how companies manage their social and environmental impacts as well as their economic contribution. Besides the terms CSR and CC, another frequently used and related term is corporate social performance (CSP). The EIU study said that, “corporate citizenship is becoming increasingly important for the long-term health of companies even though most struggle to show a return on their investment from socially responsible activities… 74 per cent of respondents to the survey say corporate citizenship can help increase profits at their company… Survey respondents who say effective corporate citizenship can help to improve the bottom line are also more likely to say their strategy is ‘very important’ to their business (33 per cent) compared with other survey respondents (8 per cent).”Īt the heart of the debate as to whether CSR improves profits is first how you define it. Corporate citizenship is another term roughly equivalent to CSR. Substantiating some of these beliefs is a study, Corporate citizenship: Profiting from a sustainable business, by the Economist Intelligence Unit (EIU) published in November 2008. This may enhance the company’s stock price, making executives’ stock and stock options more profitable and shareholders happier.
An added advantage for public companies is that aggressive CSR activities may help them gain a possible listing in the FTSE4Good or Dow Jones Sustainability Indexes, or other similar indices.
Also, CSR activities focusing on sustainability issues may lower costs and improve efficiencies as well. They understand that CSR can promote respect for their company in the marketplace which can result in higher sales, enhance employee loyalty and attract better personnel to the firm. Most executives believe that CSR can improve profits. However, linking profit growth to abstract variables that are frequently difficult to define is a challenging task. And as I review here, the research does show that it may improve profits. But few executives and managers are aware of the research on this important subject. It is generally held that corporate social responsibility (CSR) could increase company profits and thus most large companies are actively engaged in it.
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