Critique on "How Corporate Social Responsibility Engagement Strategy Moderates the CSR Financial Performance Relationship"

Introduction

Corporate Social Responsibility (CSR) has been becoming popular nowadays among executives, business academics, and public bureaucrats. This paper incorporates and expands the  gathered  related literature on Corporate Social  Responsibility  (CSR)  which also  includes the theoretical framework and propositions on how do companies can  gain  social  and economic   benefits from  engaging in CSR activities. This paper proposes to relate company’s CSR initiative such as CSR related strategies integration of CSR activities into the company, innovate CSR related strategies, enhance CSR related advertizing and risk management, relationships with CSR-related government and non-governmental organizations.

Research Objectives

·         The objectives of this research is to  find out the    financial advantages  and disadvantages  that a company  can get from  taking part a sustainable  Corporate Social Responsibility  (CSR)  both in the  company and its  outside environment.

·         Secondly, to determine which is more prominent in    taking part in the CSR strategy financial loss or gain of the business.

·         Thirdly, to discuss the long-term financial benefits that the company can get in doing a related-manner and sustainable CSR strategy.

·         Fourthly, to discuss how unrelated manner and unsustainable CSR do strategy can hurt the business in the long run.

Theoretical Framework

Servaes & Tamayo (2012)   emphasized that CSR activities can enhance the company’s value through increasing the level of the public awareness about the products or services.  This is even more intensified by advertising campaign. However, those companies with low public awareness, has a low impact of its CSR activities on the firm value aspect. And, even the advertising has also a negative impact to the public.  So, if there is a consistency between the advertising intensity and CSR activities, there is a positive impact on the company performance and financial gain.

Research Problem

What are the advantages and disadvantages that a company can get in taking part in a consistent, related-manner and well-sustainable CSR strategy?

Review of Related Literature

Tang, Hull & Rothenberg (2012)  have claimed that  the firms’ success and  profitability   hugely depends on  how the firms engage in corporate social responsibility strategy and how its  corporate financial performance  associate with the context of  creating a  more responsible and committed  business operations in the community where it operates. Furthermore, “How Corporate Social Responsibility Engagement… “ (2012) has explained that  if the company engages  slowly and consistently  in Corporate Social Responsibility (CSR),  the CSR-related  dimensions are being focused on  enhancing  its   mass efficiencies by  enhancing the financial benefits of the Customer Social Responsibility engagement strategy.

NBS (2013) found that there is a strong connection of corporate social and financial performance that is met through a U-shaped. Experimenting in CSR leads to the second-rate performance of the company. According to Milton Friedman’s theory, CSR incurs costs and lose competitive performance in the firm.  Meaning, if the company is committed to engage in CSR, naturally, the firm will incur costs in different community projects which may lower the profitability of the organization.

On the contrary, many scholars disagree with the above concept, instead they explained that the relationship between the social performance and firm’s profitability   underlies on fostering the trust in their stakeholders through being active in civic activities and other social performances. The more the company engages and sustains in different socio-civic programs, the more the chances will its products and services to be recognized by the potential clients from different locations.   Taking part in socio-civic activities is a great opportunity for the firm to market its products and services to many potential customers. And, this strategy may increase the profitability of the company.  It is also added that the   it is inevitable that the firms experience high and low profitable rate when they commit in social performance.   Yes, at the beginning of the initiative, there are high costs of expenditures for various socio-civic programs. However, in the long run, many business scholars say that   a company tends to have a high financial performance and ROA after displaying a continuous commitment and sustainability of supporting the various socio-civic programs. In the U-shaped model, of course, the middle position is the lowest level. However, it is just temporary,   as you can see both left and right sides of the U-shaped rise higher than the middle position. So, it only shows, that after the  initiative  of the company for  highest commitment to  environmental  and social sustainability, the direction that the  business will lead to is going up, and it means  more clients  and more profits. (NBS, 2013).

Kittilaksanawong (2011) cited the work of (Hull and Rothenberg, 2008; Waddock and Graves, 1997) which is asserting that a company has to integrate CSR to the fullest activities in the business operations in order to make most of the extra costs of products or processes associated with CSR innovative steps. Besides the company will only provide a little portion of the contribution of this kind of   undertakings as to compare to the additional benefits that a company can get in sustaining and continuously translating the CSR strategy into regular organizational performance and commitment. Many business analysts considered   the sustainability of CSR strategy as one of the great marketing opportunities of the company to market their products through civic groups or programs.

Therefore, firms should take Corporate Social Responsibility as an enormous opportunity rather than a loss or threats of a business.  (Sharma, 2000; Sharma et al., 1999, cited by

Kittilaksanawong, 2011). 

Research Methodology

This research uses a comparative study with the   works and articles of the reputable scholars and researchers in the field in order to validate the reliability and the consistency of the   present research.

Research Design

The researcher chose to apply a descriptive research design in order to describe clearly and comprehensively the major points of the study. The research design is also supported by personal interview and   distribution of questionnaire in order to gather data and information in order to come up with the findings and results.

Limitation of the Study

This study only focuses on the CSR related-issues that attributes to the success of CSR activities as well as to the success and financial gains   of the company.

Significance of the Study

The significance of this  study is  to  come up with a blueprint evidence  to be a noteworthy  for the  next   generation of researchers  who will conduct another research about the  same topic “Corporate Social Responsibility”  (CSR), and what  the companies can  gain from engaging  in  CSR activities within the organization as well as in  a more upscale  environment.

Findings of the Study

·         This research found that when a company engages in Corporate Social Responsibility (CSR) in a related manner, the return of assets (ROA) of the company is higher than the company that engages in CSR in an unrelated manner.

·         The company increases more its operational performance and financial benefits when the company engages in a sustainable and consistent CSR engagement strategy. On the other hand, the company   encounters more financial sufferings when it is inconsistent and unsustainable with its CSR engagement strategy.

·         If and when a company engages first in internal Corporate Social Responsibility (CSR),   for sure, the company will benefit through its sustainable and consistent performance. The Return of Assets will definitely suffer if the company will act differently from the CSR principles.

·         Finally, the Corporate Social Responsibility (CSR) and the Return of Assets (ROA) is not affected by the way at which Corporate Social Responsibility is being adopted and implemented within the organization and outside the organization.

Conclusion

 This research has found that a company should differentiate its products and services based on the organization’s innovative CSR attributions.  It should be taken into great account if the product is lesser innovative and lesser competitive than its rival products. The  public’s   familiarity of the firm’s  products  will be enhanced  through  CSR initiatives  with  different  NGOs and other  private   and public   companies  joining in the  non-profit  undertakings. More efforts and  longer sustainable  performance-based CSR strategy of the company will  determine  the  direct  and clear connection  of  firm’s long term   financial benefits  from  the  CSR financial performance.  Engaging in CSR   undertakings will enable the company to improve further its competitive advantages and even create win-win relationships with all its stakeholders. More than gaining from cost and risk reduction process as well as the outstanding image and reputation that a company is promoting in CSR strategy.

 

References:

How corporate social responsibility engagement strategy moderates the CSR-financial performance relationship 2012. Accessed 21 September 2013 from, ew15.vigiepme.org/index.php?option=com_content&view=article&id=837:how-corporate-social-responsibility-engagement-strategy-moderates-the-csr-financial-perfo.

Kittilaksanawong, W 2011, 'Doing well by doing well? Implementing new effective integrated CSR strategy. ' African Journal of Business Management.  Vol. 5, No. 4, pp. 1211-1224.DOI: 10.5897/AJBM10.576. Accessed 21 September 2013 from, http://www.academicjournals.org/ajbm/pdf/pdf2011/18Feb/Kittilaksanawong%202.pdf

NBS 2013, CSR pays when you bake it in or ignore it completely. Network for business sustainability. Accessed 21 September 2013 from, http://nbs.net/knowledge/csr-pays-when-you-bake-it-in-or-ignore-it-completely/

Research brief: Corporate citizenship strategy must be chosen carefully to maximize benefit. Center for corporate citizenship.  Boston College Carroll of Management. Accessed 21 September 2013 from, http://www.bcccc.net/index.cfm?pageId=2484

Servaes, H & Tamayo, A 2012, 'The impact of corporate social responsibility on firm value: The role of customer awareness. forthcoming,' Management Science. Accessed 21 September 2013 from, http://faculty.london.edu/hservaes/ms2013.pdf

Tang, Z, Hull^*, CE & Rothenberg, S 2012, 'How corporate social responsibility engagement strategy moderates the CSR–Financial performance relationship.' Journal of Management Studies. Vol. 49, No. 7, pp. 1274-1303. [doi: 10.1111/j.1467-6486.2012.01068.x]