“High performance and high integrity are good for the bottom line.” In a new section of the Essential Knowledge Project, Robert L. Heath, Ph.D., and Lan Ni, Ph.D. make the case for corporate social responsibility (CSR) based on existing research.
While social responsibility may be a timeless concern, the topic began receiving serious management policy discussion during the 1950s. One way or another, all such discussions recall Milton Friedman’s famous claim that publicly held companies are responsible only for increasing profits by efficiently doing whatever they are in business to do. But critics believe that Friedman missed the impact of CSR on reducing business costs and bolstering profits.
“Most studies have identified a positive relationship (although not always linear) between CSR activities and organization performance as measured by various indicators such as shareholder returns, profit, or marketing impact,” say Heath and Ni. They review the major justifications for CSR in the research base, among them:
- The moral argument that CSR represents a fundamental advance from “inside-out” communication to “outside-in” relationship building through mutual and aligned interests.
- The rational and economic argument that maximizing business performance depends on minimizing operational and financial constraints.
- The stakeholder perspective that CSR is the foundation for understanding and meeting expectations of activist publics in an era where a local concern can receive instant global attention.
- The social capital perspective that organizations need a “stockpile of goodwill” to address and recover from a crisis and to develop effective partnerships.
Does the research base offer anything about how to implement CSR? Heath and Ni discuss such strategies as top-down commitment, implementing a CSR structural framework within the organization, and a position statement that includes a conflict resolution process. This should be further supported through a CSR audit, “triple bottom line” (financial, environmental and social) reporting, communications inside and outside the organization, and a CSR ombudsman. The research base also explores longer term strategies based on stakeholder involvement, changes to corporate governance introducing greater transparency and accountability, and ethical decision processes throughout the organization.
The authors conclude that public relations is ideally positioned to help organizations and communities function better together. “CSR is the means by which an organization is good first as a foundation for being an effective communicator. Organizational culture and character count. Both as a ‘listener’ and communicator, public relations can aid organizations’ ability to foster mutually beneficial interests proactively as a problem solver rather than reactively as lessons learned.”
At the time of my earlier comment, I should also have mentioned the results of a study Steven Bruning and I conducted that examined three types of organization-public relationships; professional, personal and community. Collectively AND INDIVIDUALLY, higher ratings of the organization with regard to these “relationship dimensions” were found to be linked to positive consumer behavior toward an organization. The results were published in 1999 in the Journal of Public Relations Review and the report was named the top public relations article of 1999 by a leading academic organization.
You might want to take a peek at a 1998 article, Dimensions of Organization-Public Relationships, by John Ledingham and Steven Bruning. The article points out how the way in which stakeholders rated an organization with regard to five relationship dimensions served as predictors of intended behavior, in that case, the behavior concerned staying with a service provider or going with a new provider. The data indicate that hose who rate the provider higher on relationship dimensions are more likely to stay with the provider rather than go with a competitor even when the competitor;s rates are lower than those of the current provider. thus, relationship becomes a value added and directly impacts (positively) the organization’s “bottom line.”
I am a practicing pr professional for over 20 years now.
I had the chance to meet Mr. John Paluszek when he was still PRSA President and the Public Relations Society of the Philippines invited him to be one of our speakers in a PR Congress held sometime late 80’s.
I was still a student then- and I will never forget my encounter with Mr. Paluszek. he has greatly influenced me – and will never forget him.
Hope you can send him this information.
As are you, Peter, Lan and I are aware of the controversy over the relationship between profit and CSR. We would encourage you to read our section of EKP on CSR, especially the parts under the headings of “Debate around Friedman’s Arguments” and “Profits and CSR: Partners or Opponents? (Are We More Able to Generate and Use Revenue Wisely by Meeting Stakeholder CSR Expectations?)” You will find some of the substantive research that you are looking for.
At the same time, you may want to check the following for more research data that demonstrated the link between CSR and profit.
1. Lichtenstein, Drumwright, and Braig (2004)’s field studies support the theme that CSR positively affects customer attitudes and identifications with businesses. Such effects lead not only to increased intention to purchase from those companies but also increased intention to contribute to the charities favored by the company. (Lichtenstein, D. R., Drumwright, M. E., & Braig, B. M. (2004). The effect of corporate social responsibility on customer donations to corporate-supported nonprofits. Journal of Marketing, 98, 16-32.)
2. Beliveau, Cottrill, and O’Neill (1994) found that the CSR-profit relationship is not linear, but varied by industry and by different company performance indicators which responded differently to CSR measures. In particular, stock market measures lead, while accounting measures lag CSR. Beliveau, B., Cottrill, M., & O’Neill, H. M. (1994). Predicting corporate social responsiveness: A model drawn from three perspectives. Journal of Business Ethics, 13, 731-738.
3. Sen and Bhattacharya (2001) discovered that CSR performance can increase marketing clout if it relates to product quality and/or consumers’ personal preference views on key social issues. Sen, S., & Bhattacharya, C. B. ( 2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38, 225-244.
4. Cornwell and Coote (2005) found that if supporters of a non-profit organization know of a mutually beneficial relationship between it and a company that knowledge and the identification with the non-profit will predict consumer purchase intentions. Cornwell, T. B., & Coote, L. V. (2005). Corporate sponsorship of a cause: The role of identification in purchase intent. Journal of Business Research, 58, 268-276.
5. Barone, Miyazaki, and Taylor (2000) provided evidence that awareness of a businesses commitment to a cause increases its marketing impact. Barone, J. J., Miyazaki, A. D., & Taylor, K. A. (2000). The influence of cause related marketing on consumer choice: Does one good turn deserve another? Journal of Academy of Marketing Science, 29, 248-262.
6. Herremans, Akathaporn, and McInnes (1993) found that business reputations correlate positively with financial performance. These authors evaluated US manufacturing companies in a longitudinal study that revealed those with better reputations for CSR outperformed those with a poor reputation. Herremans, I. M., Akathaporn, P., & McInnes, M. (1993). An investigation of corporate social responsibility reputation and economic performance. Accounting, Organizations, & Society, 18, 587-604.
Studies such as these reflect the continuing effort to document the advantages of CSR as well as evidence its improvement as a movement that calls for managements to make wise investments with it in mind.
Peter,
There is a chapter in “Public Relations as Relationship Management” by Laurie Wilson that is titled “Building Employee and Community Relationships Through Volunteerism: A Case Study.” The book is edited by John Ledingham and Stephen Bruning. This chapter contains quantitative evidence of the effectiveness of CSR for Novell.
I like your idea about comparing performance indicators for UK-based public companies.
Tiffany
Could someone identify for me the substantive research that actually identfies and quantifies the assertion that there are positive relationships between CSR activities and improved corporate and operational performance indicators in corporations/organisations. So far as I am aware only Mckinsey have attempted to substantiate the claim and that in research from the 1990s which proved slightly suspect.
Statutory requirements for non-financial reporting became manadatory for UK based public companies from 1 October 2008 – the first such requirements anywhere in the world. I suggest the authors who make these claims should wait for three years when they are able to assess the performance of those with high CSR performance indicators against their peers with lower performambce indicators.
Nice warm feelings from project based CSR activity evaluation does not move investment sentiment or qualify as substantive research.
PLw