1、Does Corporate Social Responsibility Increase Profits?Posted by de-admin May 12, 2011 Printer-friendlyby Ron Robins, Investing for the SoulIt is generally held that corporate social responsibility (CSR) could increase companyprofits and thus most large companies are actively engaged in it. But few e
2、xecutivesand managers are aware of the research on this important subject. And as I reviewhere, the research does show that it may improve profits. However, linking profitgrowth to abstract variables that are frequently difficult to define is a challenging task.Most executives believe that CSR can i
3、mprove profits. Theyunderstand that CSR can promote respect for their company in the marketplace whichcan result in higher sales, enhance employee loyalty and attract better personnel to thefirm. Also, CSR activities focusing on sustainability issues may lower costs andimprove efficiencies as well.
4、An added advantage for public companies is thataggressive CSR activities may help them gain a possible listing in the FTSE4Good orDow Jones Sustainability Indexes, or other similar indices. This may enhance thecompanys stock price, making executives stock and stock options more profitableand shareho
5、lders happier.Substantiating some of these beliefs is a study, Corporate citizenship: Profiting froma sustainable business, by the Economist Intelligence Unit (EIU) published inNovember 2008. Corporate citizenship is another term roughly equivalent to CSR.The EIU study said that, “corporate citizens
6、hip CC is becoming increasinglyimportant for the long-term health of companies even though most struggle to show areturn on their investment from socially responsible activities 74 per cent ofrespondents to the survey say corporate citizenship can help increase profits at theircompany Survey respond
7、ents who say effective corporate citizenship can help toimprove the bottom line are also more likely to say their strategy is very importantto their business (33 per cent) compared with other survey respondents (8 per cent).”At the heart of the debate as to whether CSR improves profits is first how
8、you defineit. Besides the terms CSR and CC, another frequently used and related term iscorporate social performance (CSP). In the above quoted EIU study, it provides thefollowing definition of CC: “corporate citizenship is defined as transcendingphilanthropy and compliance, and is addressing how com
9、panies manage their socialand environmental impacts as well as their economic contribution. Corporate citizensare accountable not just to shareholders, but also to stakeholders such as employees,consumers, suppliers, local communities and society at large.”The study of CSR and its relation to corpor
10、ate profits is growing. The most recent study on this subject is by Cristiana Manescu. In her thesis, Economic Implicationsof Corporate Social Responsibility and Responsible Investments,” at theUniversity of Gothenburgs School of Business, Economics and Law, Sweden, shewrote on December 6, 2010 that
11、, “the results of her thesis reveal that CSR activitiesdo not generally have a negative effect on profitability, but that in the few cases wherethey have a positive effect, this effect is rather small.” Other studies add furtherperspectives.Defining the experience of CSR in relation to different ind
12、ustries is this study, TheEconomics and Politics of Corporate Social Performance by David P. Baron,Maretno A. Harjoto, and Hoje Jo, published on April 21, 2009. The researchers foundthat, “For consumer industries, greater CSP corporate social performance isassociated with better CFP corporate financ
13、ial performance, and the opposite is truefor industrial industries Empirical studies have examined the relation between CSRand corporate financial performance, and while the results are mixed, overall theresearch has found a positive but weak correlation.”However, reviewing individual empirical stud
14、ies can be confusing. But by using thetechnique of meta-analysis, many studies can be statistically analysed to determinecollective results. A meta-analysis on CSR and its link to profits won the famedsocially responsible investing, Moskowitz Prize in 2004. The study, CorporateSocial and Financial P
15、erformance: A Meta-Analysis, was compiled byresearchers Marc Orlitzky, Frank L. Schmidt and Sara L. Rynes. It yieldedencouraging data suggesting a positive link between CSR and increased profits.Summing up their results, the researchers said, “we conducted a meta-analysis of 52studies (which represent the population of prior quantitative inquiry) yielding a totalsample size of 33,878 observations. The meta-analytic findings suggest that corporatevirtue in the form of social responsibility and, to a lesser extent, environmentalresponsi
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