CSR Research

Williams reported that the topic of corporate responsibility has been given increasing academic attention in the past decades, citing data collected and analyzed by Devinney that showed that the number of articles relating to the topic had risen significantly in various journals devoted to environmental sciences, economics, management, sociology, psychology and law.[1]  One of the most popular topics among academics has been the relationship between corporate responsibility and financial performance, an important question given the consistent need for advocates of corporate responsibility initiatives to make a strong “business case” beyond the ethical arguments.[2]  Williams noted that as studies have become more sophisticated in identifying the mediating variables and the quality of data has improved, the results have been more consistent in showing positive financial results from corporate responsibility, an outcomes that many who have studied the issue can be attributed to the fact that corporate responsibility strategies and operating procedures positively influence certain key intangibles that are significantly related to corporate financial performance such as innovation, human capital improvements, reputation and corporate culture.[3]

While studies have identified improvements on a range of performance metrics, such as lowering the cost of capital, positive influence on stock price performance and better operational performance, the specific linkages between particular corporate responsibility-related operational and managerial competencies and specific performance outcomes are still unclear.[4]  Adeneye and Ahmed examined the impact of CSR on company performance using a data set of 500 firms from the United Kingdom and found a significant positive relationship between CSR, market to book value and return on capital employed; however, the researchers found no significant relationship between CSR and firm size (i.e., the value of a company’s total assets did not determine the engagement of such company in CSR practices).[5]

Researchers have also been interested in assessing the connection between board composition and committees and measurable corporate social performance.  While it can logically be assumed that creation of a specific board committee dedicated to corporate responsibility would have a positive impact on a company’s social performance, the results from studies have been mixed.[6]  William cited several factors that may come into play such as whether the committee was established to promote better environmental or social performance or as a reaction to a particular issue or problem.[7]  One survey found that independent, larger and less diverse boards were associated with worse environmental performance, an outcome that could be attributed to a lack of in-depth knowledge of the environmental risks confronting the company, and it has been suggested that environmental performance would be better improved by reducing board independence and oversight by a separate committee and allowing a powerful CEO to develop and execute his or her vision for positive environmental impacts through managerial strategies.[8]  On a related note, Williams observed that the presence of sustainability disclosures on company websites, just like the presence of corporate responsibility committees at the board level, should not be understood as an unambiguous signal of actual corporate responsibility, pointing out that companies had often touted their dedication to sustainability while being embroiled in real world controversies relating to income inequality, contribution to public health problems and illegal and unethical corporate behavior.[9]

Other areas of interest to researchers have included the relationship between the types of investors in a company and the company’s environmental and social performance and the impact of the corporate governance system in which the company operates.  For example, several studies have found that companies with higher percentages of long term, pension fund investors had significantly better environmental and social performance than companies with lower percentages and that environmental and social performance suffered when companies were forced to deal with short-term shareholder activism from mutual funds and investment banks.[10]  As for cross-jurisdictional research, one study found that: “among different legal origins, the English common law—widely believed to be mostly shareholder oriented—fosters CSR the least; within the civil law countries, firms of countries with German legal origin outperform their French counterparts in terms of ecological and environmental policy, but the French legal origin firms outperform German legal origin companies in social issues and labor relations. Companies under the Scandinavian legal origin score highest on CSR (and all its subfields)”.[11]  Williams observed that “where, as in the common law system, the state’s role in the economy is understood to be more limited in addressing economic inequality or promoting and protecting labor or environmental interests than among Scandinavian countries or those based on civil law legal families, there is more pressure for voluntary corporate responsibility issues to address these issues . . . [however] . . . evidence suggests those voluntary initiatives are less effective in promoting social and environmental social welfare than are the types of laws and institutional arrangements found in the Scandinavian and civil law legal contexts”.[12]

D’Amato et al. noted that CSR and sustainability had become a prominent feature of the business and society literature and addressed topics such as business ethics, corporate social performance, global corporate citizenship, and stakeholder management.[13]  They argued that CSR had become a leading principle of top management and of entrepreneurs and that this meant that traditional management education needed to be updated to provide a clearer understanding of the role and meaning of socially responsible leadership.  They conducted an extensive survey of the academic and business literature on CSR and leadership based on literature on CSR, corporate citizenship and sustainability published between 2000 and 2009.[14]  The results were published both as an extensive annotated bibliography that included a wide range of references that could be used as a basis for further education and as a brief compendium of the following key themes that were emerging throughout the literature:

• Approaches to Implementing CSR: Researchers were interested in why organizations became interested in implementing CSR and the factors that influenced the path and progress of implementation.[15] Not surprisingly, there is no universal stage of development among organizations as to the degree of integration of CSR into their strategies and daily operations.  In fact, it is most appropriate to view the CSR awareness and approaches of organizations along a continuum that begins, at one extreme with organizations that do not acknowledge any responsibility to society and the environment and then continues to the other extreme where one finds organizations that view their operations as having a significant impact as well as reliance on society at the economic, social, and ecological levels, thus resulting in a sense of responsibility beyond the traditional boundaries of the organization.  Most organizations fall somewhere in between these two extremes and the focus of much of the research in the area is identifying the factors and conditions that drive organizations to move from an elementary stage toward a transformative stage that involves taking on more responsibility for the impact that their operations have on societies and the environment.[16]  An organization’s level of social responsibility is influenced by factors such as the financial condition of the organization, health of the economy, well-enforced state regulations and external pressures (e.g., activists).
• Drivers of Ongoing Commitment: CSR is long-term initiative that requires ongoing commitment and researchers have found that the requisite commitment generally comes from economic self-interest (i.e., a solid business case), ethical grounding (i.e., the moral impor­tance of sustainable development) or a combination of both.[17]  As researchers have found evidence of a significant and positive relationship between CSR and value added, the business case for CSR has been enhanced and organizations embrace the notion that their long-term business survival is clearly tied to operating in a way that respects the rights and needs of people, communities and the environment.  The business case argument is popular in the US; however, studies have found that European companies tend to rely more heavily on language or theories of citizenship, corporate accountability or moral commitment when justifying and explaining their CSR approaches.
• Corporate Identity and Ethics: While, as noted above, CSR can be used as a defensive policy, the more likely scenario is an evolution of the personality of the organization—the organization’s identity (i.e., what it really is, rather than what it might advocate)—toward stronger and broader integration of CSR into organizational strategy and culture.  CSR has become a way of matching organizational operations to rapidly changing social values and societal expectations regarding the economic, legal, ethical and discretionary responsibilities of businesses.  Companies have recognized the competitive advantages associated with establishing a socially responsible corporate identify using branding.  In addition, ethical behavior a shared set of values and guiding principles deeply engrained throughout the organization are seen as prerequisites for strategic CSR and an integral part of corporate identity.[18]
• CSR and Accountability: Accountability is one of the processes whereby a leader, company, or organization seeks to ensure integrity and researchers noted that organizations and their leaders were increasingly concerned with including appropriate CSR measures in their internal and supply-chain activities to demonstrate accountability to their wide range of stakeholders.  When considering accountability, it is not just determining whether an organization is making false promises but also whether the actual behaviors of the organizations, albeit well meaning, are failing to achieve the promised impact.  D’Amato et al. conceded that while CSR requires accountability by all leaders, individuals, organizations, stakeholders, customers, and community members, accountability is complex and influenced by multiple and tightly interconnected factors.[19]
• Partnering with Stakeholders: According to D’Amato et al. CSR is strictly embedded with a multitude of business actors and, as such, organizational leaders need to be adept at stakeholder engagement and communication.  Researchers identified two basic relationship models that explain how leaders can best interact with multiple and diverse stakeholders. The inside-out ap­proach suggests that leaders can manage their CSR activities and achieve favorable reputations with their stakeholders by building CSR activities across boundaries and in a framework where decisions are made in­side the organization and where communications with stakeholders, in the form of CSR and sustainability reports, are primarily a means for delivering information that has already developed and informing stakeholders about decisions that impact them that often have already been implemented.[20]  Suffice to say that this approach is often not satisfying to stakeholders, many of which clamor for organizations to follow an alternative path based on substantial organizational attention to and engagement with stakeholders to reach CSR goals through negotiation and, in some cases, joint decision making.  Of course, this approach can be challenging and organizations and their leaders differ in the degree of comfort with incorporating stakeholders’ interests and input into operational decisions.  Commentators have suggested that the vital link between businesses and stakeholder engagement and management is leadership and urged leaders to take a holistic approach to stakeholder engagement.[21]
• Leadership Capabilities and Competencies: Evidence from the survey confirmed that leadership played a pivotal role in the initiation and development of CSR programs and initiatives within and across organizations and that the role of the leader in guiding business toward sustainable social responsibility is complex and vast and requires a unique array of leadership skills and competencies.  While the literature is extensive, notice should be taken of arguments that responsible leaders must have the highest integrity, a deep understanding of difficult concepts such as sustainable development, a commitment to building enduring organizations in association with others, a deep sense of purpose and the ability and drive to remain true to their core values.  In addition, leaders of socially responsible organizations have been associated with the charismatic, transformational and visionary leadership styles, all of which require a leader to be able to enthusiastically communicate an innovation vision and energize followers in order to pull them toward committing to the vision of the leader with respect to sustainability.  As for specific leadership competencies, researchers have argued that “responsible leaders” demonstrate courage, business acumen, passion, compassion, sense of humor, vision for legacy (instead of vision for activity), integrity, teamwork, respect and professionalism.  However, as with so many aspects of leadership studies in general, more research is needed to move beyond recitations of leaders’ styles, skills and competencies to identify effective practices that leaders can use in order to discharge their responsibilities for the impact of their organizations on society and the environment beyond legal compliance.[22]
• Organizational Challenges and Limitations: Researchers have explored the challenges and limitations that organizations must face and overcome in implementing CSR and noted that organizations must deal with both political issues and organizational-level concerns including difficulties in making changes to long-standing cultural norms.  Obviously CSR is challenging given the need to consider the needs of multiple stakeholders.  Moreover, the subject matter of CSR evolves rapidly as the roles and resources of governments change since businesses are being asked to step in to address challenges that had been consider the responsibility of the state in the past (e.g., addressing health, education and poverty issues).  In addition, as governments step away from certain issues, such as climate change, society expects businesses to act on their own.  Consistent with the discussion immediately above, commentators have suggested that the most challenging aspect of CSR implementation is developing the requisite pool of leadership talent.[23]  At the heart of the organizational challenges is the reality that sustainability activities are largely voluntary and that organizations, through their leaders, must make hard decisions about the best way to engage with stakeholders and include social and environmental concerns in their strategies and operational activities.

For more information on the topic of this article, see the author’s book Responsible Business: A Guide to Corporate Social Responsibility for Sustainable Entrepreneurs, which is available here , and materials distributed through the Sustainable Entrepreneurship Project. 

[1] C. Williams, “Corporate Social Responsibility and Corporate Governance” in J. Gordon and G. Ringe (Eds.), Oxford Handbook of Corporate Law and Governance (Oxford: Oxford University Press, 2016), 20, available at http://digitalcommons.osgoode.yorku.ca/scholarly_works/1784.

[2] For further discussion, see A. Carroll and K. Shabama, “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice”, International Journal of Management Reviews, 12(1) (2010), 85.

[3] C. Williams, “Corporate Social Responsibility and Corporate Governance” in J. Gordon and G. Ringe (Eds.), Oxford Handbook of Corporate Law and Governance (Oxford: Oxford University Press, 2016), 25, available at http://digitalcommons.osgoode.yorku.ca/scholarly_works/1784 (citing J. Surroca, J. Tribó and S. Waddock, “Corporate Responsibility and Financial Performance: The Role of Intangible Resources”, Strategic Management Journal, 31 (2010), 463).

[4] Id. at 26 (citing G. Clark, A. Feiner and M. Viehs, “From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance (2015), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2508281; and T. Devinney, “Is the Socially Responsible Corporation a Myth? The Good, the Bad and the Ugly of Corporate Social Responsibility”, Academic Management Perspectives (May 2009), 44).

[5] Y. Adeneye and M. Ahmed, “Corporate Social Responsibility and Company Performance”, Journal of Business Studies Quarterly, 7(1) (2015).

[6] C. Williams, “Corporate Social Responsibility and Corporate Governance” in J. Gordon and G. Ringe (Eds.), Oxford Handbook of Corporate Law and Governance (Oxford: Oxford University Press, 2016), 27, available at http://digitalcommons.osgoode.yorku.ca/scholarly_works/1784.

[7] Id. at 27 (citing J. Walls, P. Berrone and P. Phan, “Corporate Governance and Environmental Performance: Is there Really a Link?”, Strategic Management Journal, 33 (2012), 885).

[8] Id. at 27 (citing J. Walls, P. Berrone and P. Phan, “Corporate Governance and Environmental Performance: Is there Really a Link?”, Strategic Management Journal, 33 (2012), 885, 902).  See also J. Surroca and J. Tribó, “Managerial Entrenchment and Corporate Social Performance”, Journal of Business Finance and Accounting, 35(5-6) (2008), 748 (arguing that corporate responsibility is a strategy for management entrenchment and that CEOs establish stronger ties with internal and external constituencies, such as employees and community elites, in order to insulate themselves from accountability mechanisms at the board level).

[9] Id. at 29.

[10] Id. at 30-31 (citing R. Johnson and D. Greening, “The Effects of Corporate Governance and Institutional Investor Types on Corporate Social Performance”, Academy of Management Journal, 42:5 (1999), 564; and D. Neubaum and S. Zahra, “Institutional Ownership and Corporate Social Performance: the Moderating Effects of Investment Horizon, Activism, and Coordination”, Journal of Management, 32:1 (2006), 108).

[11] Id. at 31-32 (citing and quoting from H. Liang and L. Renneboog, “The Foundations of Corporate Social Responsibility”, Tilberg Law and Economics Center Discussion Paper No. 2013-023, available at http://ssrn.com/abstract=2371103).

[12] Id. at 33.

[13] A. D’Amato, S. Henderson and S. Florence, Corporate Social Responsibility and Sustainable Business Guide to Leadership Tasks and Functions (Greensboro NC: CCL Press/Center for Creative Leadership, 2009), 2.

[14] The researchers noted that they based their work on a keyword search that used not only CSR and leadership but also well-known synonyms for CSR and leadership such as sustainability, corporate citizenship, corporate sustainability, ethical leadership, corporate governance and corporate social performance.  Id. at 2-3.

[15] Id. at 4.

[16] Id. at 1-2.

[17] Id. at 4-5.

[18] Id. at 5-6.

[19] Id. at 6-7.

[20] Id. at 7-8.

[21] Id. at 8.

[22] Id. at 8-9.

[23] Id. at 10-11.