Shareholders and citizens are increasingly holding to account companies and organisations that claim to practice corporate social responsibility (CSR) yet may deliver little more than lip service.

The United Nations Industrial Development Organization defines CSR as a management strategy that integrates social and environmental concerns into how companies do business and interact with stakeholders.  

American economist Howard Bowen coined the name in 1953. It gained currency in the 1970s, became more widespread in the 1990s and has morphed into an essential business strategy in the past two decades.

But what motivates companies to pursue CSR?

Two experts in the area are Alwyn Lim, Associate Professor of Sociology at the Singapore Management University, and Assistant Professor Shawn Pope, who’s based at Leonardo de Vinci University Center in France and is an instructor at Stanford University.

They say: “CSR is one of the great consensus movements of our time, not only among the citizenry, but also among companies — globally, across industries, and throughout the corporate hierarchy.”

Mapping two decades’ worth of analysis
Their new study, Why Companies Practice Corporate Social Responsibility argues that companies and organisations harness CSR for a halo effect on their reputation, whereby consumer awareness about the organisation’s CSR actions influences their perception of its other actions.

Their findings are far from superficial, and it involved a meta-analysis of 200 surveys delving into CSR over the past 20 years. It’s just been published in the peer-reviewed journal, Corporate Social Responsibility and Environment Management.

Prof Lim and Prof Pope cast their research net wide. They examined the results of the surveys across 52 countries, which involved 27,000 respondents from 2003 to 2020.

Among their data were almost every blue-chip consultancy, major political bodies, including the United Nations and the European Commission, as well as the US Chamber of Commerce, and key global industry representatives from electric power in India and fishing in Norway, among others.

Motivators for CSR strategies

The researchers used Boal and Peery’s 1985 three-part construct as a lens through which to analyse their reams of data. They revamped this ‘schema’ and found what motivated companies to undertake CSR strategies largely fitted into these three categories:

• To manage power relations, and political pressure, such as avoiding fines or reducing activist pressure (political)
• To reward the organisation, including through lower capital costs and boost employee morale (economics - instrumental), and
• To fulfil their wish to benefit society and the planet (values-based - ethical).

Notably, the study devised a comprehensive yet abstract set of potential motivations and more concrete ones that could be more useful in specific business contexts.

The primary motivators for CSR are often its impact on the company’s reputation and image because it is the moral thing to do, its ability to improve the environment and expression of the company’s or leaders’ values.

However, among the top 10 of 33 most important CSR motivations were three that were often missing from surveys: Better stakeholder relations, support of employee welfare and brand improvement.

Embracing CSR for the halo effect

Whether companies or organisations embraced CSR to cut carbon emissions or increase their board’s diversity, their motivation was akin to the ‘halo’ strategy. In short, they’re keen to buff and polish their image.

Prof Lim and Prof Pope have also published their findings in the MIT Sloan Management Review. There they wrote: “By presenting themselves as true believers in CSR (saints), businesses seek to improve the overall corporate image (the halo) and expect broad benefits from diverse stakeholders to follow (the warm glow).”

Even though there may be no regulatory impetus to embrace CSR, companies and organisations see its value. That’s why the researchers held to a broad definition of CSR as actions businesses undertake to deal with social and environmental impacts, rather than legal or regulatory reasons.

“No one is making companies practice CSR; they claim to value CSR themselves. The glow of virtue emanates from within,” said the researchers.

How to use the findings

Researchers, practitioners, stakeholders, and even consumers can better “understand, predict, and shape companies’ CSR actions” with insights into factors that underpin a company’s CSR motivation(s). Due diligence to sort the true CSR “saints” from those with less-than-noble motivations means consumers are better informed.

Prof Lim and  Prof Pope added: “Consumers … crave authenticity and want to buy products from companies whose hearts are in the right place. Consumers may even research companies to discern which ones are saints and which ones bear false witness.

“[As well], companies that practice CSR are punished less by consumers for scandals, because consumers impute good intentions to these companies, despite any unfortunate events that may have transpired.”

But, it is a complex field.

Motivation: Moral trumps competitiveness

The authors found a significant gap between companies and organisations’ CSR claims and CSR actions. Also, there is more fuzziness surrounding how researchers broadly define CSR’s conceptual terms.

In addition, there is conflict about which “business practices are necessary, sufficient, and effective” among companies, said Prof Lim and Prof  Pope.

What is clear, though, is that best-performing CSR motivations were framed as “good, moral or [the] socially appropriate thing to do”. Meanwhile, CSR motivations that aimed to reward the organisation and those that managed power relations were less successful. This ranking was consistent across company sizes, the time series, geographic and industrial settings.

A key takeaway is that stakeholders will punish those they perceive to be CSR “laggards”.

The researchers say: “By creating satirical greenwashing awards and subverting companies’ own brand identities to name and shame them, for instance, concerned stakeholders can threaten companies with a range of negative outcomes, such as higher capital costs and a reduction in consumer purchases.”

That’s why unpacking corporate motivations for their CSR strategies, actions and claims, all echelons of society and business can help progress the power of CSR for all.