Corporate social responsibility (CSR), the notion that organisations should undertake actions that advance social benefits beyond that which is required by law, continues to attract varied interest and reactions from scholars and business practitioners alike (Kang, Germann, & Grewal 2016). The CSR concept obliges organisations to bear responsibility for their impact on societies and communities beyond a narrow economic one (Preuss, Barkemeyer, & Glaves 2016), and holds them to account for activities up and down their value chains beyond their established corporate boundaries (Schrempf-Stirling, Palazzo, & Phillips 2016). The overwhelming focus on CSR in recent years has seen many companies implement policy guidelines, rules, and codes of conduct aimed at ensuring that CSR becomes integral to corporate behaviour (Skilton & Purdy 2017). Indeed, as demonstrated by Kang, Germann, and Grewal (2016), consumers all over the world have joined the CSR bandwagon by demanding organisations to do more to contribute to society and aligning themselves with companies that deliver on CSR. The overbearing interest in socially responsible activities could be taken as evidence that CSR and related concepts have become an essential constituent of what it means to be a genuine corporate actor in the ever turbulent and ever competitive business environment of the 21st century (Skilton & Purdy 2017).
Despite the huge interest in CSR, it is still unclear how the paradigm of social responsibility and/or social irresponsibility affects enterprise development in terms of facilitating the performance and competitiveness of firms (Filatotchev & Nakajima 2014). Indeed, research is consistent that the literature on why organisations engage in CSR activities is quite fragmented (Kang, Germann, & Grewal 2016), with Mikolajek-Gocejna (2016) illuminating the context better by asking if CSR has an impact on organisational performance and whether it pays for organisations to be morally good. Although several authors (e.g. Gupta & Sharma 2016; Kang, Germann, & Grewal 2016) have put forward the proposition that CSR activities can also bring long-term economic benefits to an organisation, research into this area has remained relatively disjointed. Still, although a number of scholars have investigated the effect of CSR activities on corporate financial and economic performance, it is evident that “the findings remain mixed and indicate possible bi-directional relationship between CSR and economic performance” (Mikolajek-Gocejna 2016, p. 70). Equally, there are no comprehensive studies detailing the dangers and/or rewards of engaging in activities that may be deemed as socially irresponsible (Ormiston & Wong 2013). In this context, it is important to undertake an empirical study focussed on investigating how the domain of CSR affects or influences enterprise development in terms of firm performance and competitiveness.
One of the most critical issues facing organisations today is deciding whether it pays to concern themselves with CSR activities (Mikolajek-Gocejna 2016). Indeed, according to Skilton and Purdy (2017), much of the scholarship on CSR and related concepts is motivated by the desire to provide a viable response to the twin questions of what constitutes socially responsible corporate behaviour and whether organisations stand to benefit for engaging in CSR activities. As businesses worldwide continue to express an extraordinary interest in CSR and its formalised infrastructure (Preuss, Barkemeyer, & Glaves 2016), and as organisations continue to be confronted with mounting expectations relating to the effects of their decisions and the value of undertaking CSR activities (Schrempf-Stirling, Palazzo, & Phillips 2016), there appears to be little or no scholarly theorising about the role of CSR in influencing enterprise development (Filatotchev & Nakajima 2014; Das & Sanyal 2016).
Additionally, despite the plethora of research documenting that CSR practices can benefit an organisation’s bottom line, authoritative empirical evidence showing a consistent directional association between CSR activities and company profitability continues to elude scholars (Chernev & Blair 2015). As a matter of fact, there is a gap in the literature on why organisations take part in CSR activities (Christensen, Mackey, & Whetten 2014; Bhimani, Silvola, & Sivabalan 2016), the impact of CSR on business performance (Glavas & Kelley 2014), as well as the losses attributed to corporate irresponsibility (Keig, Brouthers, & Marsall 2015; Kang, Germann, & Grewal 2016). This research study aimed to fill this gap in the literature by investigating the impact of CSR activities on enterprise development.
Research Aim and Objectives
The key aim of this research study was to investigate the effect of CSR practices on business performance. The specific objectives of the study are as follows:
- To ascertain the significance of CSR practices on business performance;
- To establish the impact of CSR practices on organisational success; and
- To determine the effect of social irresponsibility on business performance.
Drawing from the described aim and study objectives, the following research questions guided the research process:
- RQ1: What is the impact of CSR practices on business performance?
- RQ2: How do CSR practices enhance and speed up the attainment of organisational success?
- RQ3: How does social irresponsibility lead to negative business outcomes?
Justification for the Study
The research on whether CSR practices occasion further advantages in terms of business performance, organisational success and competitiveness is, at best, fragmented (Mikolajek-Gocejna 2016). Not only is there limited research on the impact of CSR practices on enterprise development, but the existing scholarly works on how social irresponsibility affects important business outcomes are largely descriptive. Additionally, it should not be lost on us that some business enterprises have failed to implement socially responsible practices within their operating environments for failure to understand how and if they can gain competitive efficiencies by deviating from their primary economic objective to contribute to the wellbeing of the environment and society. These concerns justify the need to undertake this study with the view to developing a comprehensive understanding of the impact of CSR practices on business performance. Specifically, the study was motivated by the paucity of empirical research studies on the impact of CSR practices on business performance and organisational success.
Significance of Study
This research study has made several contributions to the extant literature; first, in view of a relative lack of research studies focussed on investigating the impact of CSR activities on enterprise development (organisational performance and/or loss making), it was hoped that the findings of this study will be instrumental in engendering comprehensive understanding of the role that CSR activities play in speeding up enterprise development. Such an understanding, in the view of the researcher, goes a long way in encouraging managers and their respective organisations to act more conscientiously when dealing with CSR issues. Moreover, the findings of this study generated a knowledge base that could be used by business practitioners and scholars to understand the main issues of concern that affect the relationship between CSR practices and business performance. Furthermore, it is hoped that the conclusions of the study will lead to a more comprehensive understanding of the dynamics of social irresponsibility and how it affects the organisation’s bottom line. Lastly, the findings of the present study may be used to explore institutional practices and policies that support enterprise development by encouraging businesses to become more socially responsible.
This study used a quantitative research approach and a descriptive survey design to collect field data from 20 management executives in 10 organisations based in the United Kingdom (two management executives for every organisation). A web-based survey was administered to the respondents, who had been sampled using a purposive sampling strategy. The organisations included in the study were randomly selected from the food and agriculture industry, which is known to vary in its commitment to, and implementation of, CSR activities. The data collected from the field were quantitatively analyzed using descriptive statistics to not only respond to the main study aim and objectives, but also to respond to the stated research questions.
Although the researcher believed that the chosen quantitative approach is an effective method to utilise in collecting representative data for this research study, it is possible that the sample selected for participation in this study deviated from the overall population of firms implementing CSR practices, hence skewing the study findings. Additionally, the field data comprised ten organisations, with a limited number of management executives providing the sought after responses from each organisation. The views and perspectives of these respondents cannot extend to those held generally and broadly by other management executives in the organisations studied or across the entire population of British organisations implementing proactive CSR practices. Lastly, financial and time constraints could have interfered with the researcher’s desire to undertake a more expansive study with the view to investigating the impact of CSR on enterprise development.
Structure of Dissertation
The remaining sections of the research study are structured as follows. The next section of the study, titled Literature Review, summarizes and synthesizes literature on CSR and related concepts. This section will also review extant literature on the models of CSR (stakeholder theory and social contract theory), corporate social irresponsibility, as well as the relationship between CSR and business performance. The subsequent section details the research methods, methodologies, and techniques used to undertake the study, including the research design, population and sampling process, data collection, and ethical issues. Next, a brief section describing the main hallmarks of the collected and analysed data is presented, which is then followed by the results section focussing on the analysis and discussion of the main study findings. Finally, the conclusion and recommendations section attempts to wrap up the study by underscoring the main points of interest according to the researched phenomena and providing evidence-based suggestions for practice.
This section reviews extant literature on CSR and other theoretical and conceptual concepts considered to be critical in gaining a better understanding of the main issues or phenomena of interest to the present study. The section commences by reviewing literature on the definitional and historical underpinnings of CSR. Next, the researcher makes an attempt to review and analyze contemporary literature sources on CSR, before providing a discussion of two theoretical models of CSR known as the stakeholder theory and the social contract theory. Afterwards, the key drivers of CSR are reviewed to stimulate a better understanding of why organisations engage in CSR activities. The subsequent sections are critical for this study as they review contemporary literature sources on the relationship between CSR, business performance and social irresponsibility. The last section of this chapter attempts to interpret the reviewed literature by discussing the content in terms of how it relates to the aim and objectives of the present study.
CSR: Definitions and Historical Underpinnings
CSR has been defined in the literature as “the responsibility of enterprises for their impacts on society” (Preuss, Barkemeyer, & Glaves 2016, p. 349). Mikolajek-Gocejna (2016, p. 68) cited the definition provided by the World Business Council for Sustainable Development (WBCSD) to define CSR as “an organisation’s commitment to a behaviour that leads to economic development and contributes to the welfare of its employees, local community, and society at large.” Similarly, Chernev and Blair (2015) argued that CSR comprises an entity’s commitment to the improvement of the society’s welfare through ethical business practices and contributions of corporate resources, while Das and Sanyal (2016) defined CSR as the deliberate integration of social and environmental concerns into the daily operations of businesses and into their continuous interaction with stakeholders. These definitions demonstrate that CSR has a multifaceted or multidimensional nature, with a number of authors underscoring the fact that it encompasses a firm’s economic, legal, ethical, and discretionary accountabilities toward society (Chernev & Blair 2015; Preuss, Barkemeyer, & Glaves 2016; Salaiz 2016).
A number of researchers have attempted to analyse the historical underpinnings of CSR. In his study, Husted (2015) made varied proposals to demonstrate the CSR concept picked steam in the mid-nineteenth century and was known by several names, such as service, civic mindedness, welfare work and trusteeship. The most interesting antecedents of CSR, according to this author, are almost certainly those of organisations and their principals starting in the Industrial Revolution commencing around 1750 in Britain and dispersing to Europe, the United States of America, and then Japan. In this era, the CSR activities implemented by businesses and their leaders included welfare capitalism (e.g., voluntary provision of non-wage benefits to employees, greater employment security, and employee representation to their blue-collar workers), philanthropy, reduction of working hours, refusal to hire children as workers, and prevention of environmental pollution (Husted 2015). However, it was Bowen (1953) who effectively coined the term corporate social responsibility in his seminal book titled Social Responsibilities of Businesses. In this book, Bowen not only provided an insightful and thoughtful analysis of CSR but also beseeched large and small enterprises to consider the effects of their decisions and actions on the whole social system. Later on, Davis and Blomstrom (1966, 1975) weighed in on the CSR debate by providing definitions and requesting businesses to look beyond their narrow economic and technical interests to take actions which protect and enhance the welfare of society as a whole (Mehta & Sharma 2016).
Research on CSR has been well documented, though there is a general lack of consensus on a number of issues focussing on its role in facilitating business performance and competitiveness. In their study, Preuss, Barkemeyer, and Glaves (2016, p. 349) acknowledged that organisations “are more likely to engage in CSR if there is a strong and well-enforced regulation and/or an effective system of self-regulation, shored up by active civil society organisations, institutional investors and the media.” On their part, Mishra and Modi (2016) noted that although CSR activities are often associated with positive societal implications and benefits, there still remains a wide-ranging debate related to their consequences for firm shareholders. The answer to Mishra and Modi’s question seems anchored in a study conducted by Chernev and Blair (2015). In this particular study, the authors argued that most managerial executives are convinced that socially responsible business practices can help sustain a good corporate reputation and reinforce a company’s brand, hence providing the needed competitive advantages for the firm’s shareholders. However, the main finding of the study by Chernev and Blair (2015) is that companies that engage in socially responsible practices have the capacity to influence customer perceptions of the functional performance of their product and service offerings irrespective of the fact that the CSR engagements may be unrelated to the companies’ core business.
Kang, Germann, and Grewal (2016) proposed four mechanisms that could be used to understand the CSR notion and how it operates in dynamic business environments. The four typologies proposed by these authors include (1) the slack resources mechanism depicting organisations as engaging in CSR activities because they are financially sound and have slack resources, (2) the good management mechanism depicting CSR activities as a core component of good management principles aimed at improving financial performance, (3) the penance mechanism depicting organisations as engaging in CSR activities as a form of penance or reparation aimed at offsetting past corporate social irresponsibility, and (4) the insurance mechanism that views CSR as a tool that could be used to build a reservoir of goodwill to attenuate or calm negative reactions if and when things go wrong. On their part, Filatotchev and Nakajima (2014, p. 293) acknowledged that the “most strategic CSR occurs when a company adds a social dimension to its value proposition, making social impact integral to the overall strategy.” These organisational theorists underscored the fact that the definitive assessment for CSR practices should not be the moral or ethical considerations of organisational leaders; rather, it should be the instrumental value that the implemented CSR practices generate for the organisation. As such, it is important to align CSR practices with the strategic objectives of the organisation if they are to succeed in serving the best interests of the company, its stakeholders, as well as its shareholders (Filatotchev & Nakajima 2014; Hsieh, 2015; Das & Sanyal 2016). Overall, these authors argued that corporate governance has an important role in CSR research because it acts as a critical antecedent of an organisation’s strategic decisions related to engaging in CSR activities.
Models of Corporate Social Responsibility
The stakeholder theory (Freeman 1984) proposes that “in order to be recognised as socially responsible, an organisation should take into consideration the interests of its multiple stakeholders (consumers, employees, suppliers, investors and the community), as they all have an impact on corporate financial performance” (Mikolajek-Gocejna 2016, p. 69). This theory, which is often used by marketing scholars, acknowledge that CSR produces positive correlations among stakeholders with the view to enhancing or improving prospective firm cash flows and organisational performance. Taking this perspective, investors and business practitioners are expected to react confidently to CSR activities if they predict that the positive stakeholder correlations resulting from CSR cause (1) organisations to benefit financially or economically from more consumers buying their products and/or services, (2) existing consumers to purchase more from these organisations, and/or (3) consumers to pay premium prices for these organisations’ product and service offerings in the coming years (Mishra & Modi 2016). As postulated by Glavas and Kelley (2014, p. 169), the stakeholder theory “extends the shareholder view of the firm to one that is also focussed on the relationships with and responsibilities towards various stakeholder groups.” Although there have been varied reactions to the issue of whether the stakeholder theory is normative or instrumental, some theorists have argued that the model is managerial in nature as it assists management professionals answer the questions for their own firms on what they believe should be the proper function of their organisation as well as their responsibility or conscientiousness towards stakeholders (Neron 2015; Doh, Husted, & Yang 2016).
Social Contract Theory
The social contract theory (Thomas Hobbes) has been advanced in ethics literature as an effective theoretical lens upon which to anchor the contemporary practice of CSR by organisations. At a more general level, the model proposes a person’s ethical and political responsibilities to a written or tacit agreement he or she has with every other person within a society (Wempe 2005). In business circles, however, the social contract theory comprises the responsibilities that organisations of all sizes owe to the societies and communities in which they conduct their operations and to the world as a whole (Neron 2015). Such responsibilities, according to these authors, may include corporate philanthropy or donations, CSR practices, and corporate governance. Overall, the social contract model underscores the social nature of organisations which exist as a direct consequence of an exceedingly inherent and flexible contract that acts to determine their duties, responsibilities and rights. As such, the theory portrays contemporary organisations as responsible to and subject to the will or determination of society (Wempe 2005).
Motivations for CSR Activities
A number of research studies have focussed attention to identifying the main motivating factors that push firms to implement CSR activities. In their seminal work on corporate socio-political involvement, Nalick et al. (2016) argued that the motivating stakeholder-related perspectives that come into force to prompt organisations to implement CSR practices include (1) risk taking on perceived future stakeholder benefits – here, organisations view CSR activities as an opportunity for economic or financial gain by improving their reputation or standing with sections of stakeholders who could eventually side with the CSR practices being implemented, and (2) stakeholder pressure recognition – here, stakeholders pressure their respective organisations into unwanted CSR actions or refuse to support any CSR activities (Nalick et al. 2016).These motivating factors can be contrasted with those discussed by Mehta and Sharma (2016) in their study on SMEs and corporate social responsibility in India. As postulated by these authors, firms undertake CSR activities to, among other things: enhance their internal satisfaction; increase their value system; actualise the spirit or desire of giving back to society; fulfil responsibility towards society; enhance the goodwill and reputation of business; cement good relationships with labour unions and employees; motivate employees; protect the environment; help needy and poor people; follow industry standards; and ensure economic sustainability.
In their study on CSR reporting, Bhimani, Silvola, and Sivabalan (2016) noted that the motivating factors that drive firms to engage in CSR activities include: availability of finance; risk management; avoiding tighter regulations; assisting in the internalisation of the organisation’s business; following the example given by markets and competitors; meeting the expectations of shareholders; successfully meeting the requirements of other organisations in the supply chain; increasing customer satisfaction; and meeting and possibly surpassing the expectations of civil societies and other interest groups. Other motivating factors toward engaging in CSR activities include helping organisations better manage their corporate reputation and image, generating business sustainability solutions, enhancing competitive efficiencies, meeting stakeholder requirements, improving financial performance, aligning with the values of the organisation, enhancing employee satisfaction, and attaining cost savings (Bhimani, Silvola, & Sivabalan 2016). These motivating factors can be divided into instrumental CSR (the perspective that defines CSR by its costs and impact on the organisation’s financial performance, or the argument that CSR comprises an investment so compatible or companionable with profitability that organisations should convert social responsibilities into business opportunities) and altruistic CSR (the perspective that defines CSR in terms of actions on the part of the organisation that seem to advance or acquiesce in the enhancement of some social good, beyond the narrow instantaneous interest of the organisation and its shareholders and beyond that which is required by law) (Christensen, Mackey, & Whetten 2014).
CSR, Business Performance, and Organisational Success
Several studies have attempted to assess the impact of CSR activities on business performance. In one such study, Mikolajek-Gocejna (2016) analyzed data from sampled literature sources to establish the relationship between CSR and corporate financial performance. Her study found a positive correlation “between corporate social responsibility and corporate company performance (71.7% of studies, 81.1% of companies), while only 15.1% of studies (10.8% of companies) showed no significant relationship between a company’s social responsibility and corporate financial performance” (Mikolajek-Gocejna 2016, p. 77). It is important to note that only three literature sources (3.1% of analysed organisations) demonstrated a negative correlation between CSR activities and a firm’s financial performance. On their part, Mishra and Modi (2016, p. 26) acknowledged that “although interest in CSR seems strong, an extensive body of research on the financial implications of CSR has produced mixed evidence, with a recent meta-analysis revealing an overall positive, but small, financial effect.” These authors contend that the conflicting findings on CSR may be attributed to the focused attention that has been dedicated to supporting an unambiguous or explicit direct relationship between CSR and financial value.
In one of the very few empirical studies conducted to investigate the relationship between CSR and financial performance, Lu, Wang, and Lee (2013) found that organisations that paid close attention to CSR quantitative indicators (e.g., human rights, employee relationships, and environmental issues) have a better chance to enhance their corporate efficiency and financial performance than organisations with no such activities. Another important finding of this particular study was that organisations which implement CSR practices experience stable enhancement in operating performance even during economic recessions since the practices bolster the organisations’ competitive advantages by helping them to develop a positive image and/or brand name with consumers, investors, bankers and suppliers. Lastly, this seminal study found that, in the short-term, organisations which implement CSR activities register inferior performance than organisations which do not implement such activities because organisations which implement the activities are subject to greater accountability and higher operating costs; however, these organisations are able to recover in the mid- to long-term since CSR has become a source of competitive advantage (Lu, Wang, & Lee 2013).
In his study, Pecorino (2016) used economic modelling to identify conditions under which an organisation could raise its financial performance by engaging in CSR activities involving promising to contribute a percentage of its profits towards the provision of a public good. Drawing from the economic modelling, it is evident that firms can benefit from CSR practices as “consumers understand the linkage between the purchase of the private good and the provision of a public good which they value” (p. 393). As such, competitive advantages are realised because customers’ value the public good provided by the organisation and are enthusiastic to pay a premium to a firm which engages in the provision of public goods through CSR activities. Pecorino’s view is consistent with Chernev and Blair’s (2015) characterisation of the link between CSR practices and organisational performance. These authors argued that, unlike in the past where CSR was normally perceived sorely as a tool for improving firm reputations and stimulating goodwill among consumers, contemporary trends reveal that the impact of CSR can extend past public relations and consumer goodwill to substantially influence the way customers evaluate or appraise a company’s products and service offerings. The study by Chernev and Blair was successful in demonstrating that an organisation’s engagement in CSR activities can indeed change customers’ perceptions of how the firm’s product and service offerings perform, such that products and services developed or offered by socially responsible organisations are experienced by customers as performing better.
Some earlier studies had also shown a direct positive relationship between CSR and firm- , employee-, or consumer-level engagements that may lead to competitive advantages. In one such study, Du, Bhattacharya, and Sen (2007) found that customers are more willing to advocate for organisations that engage in socially responsible practices and also to shield them against censure or disparagement. Similarly, Green and Peloza (2011) found that an organisation’s reputation for engaging in socially responsible activities tends to not only diminish customers’ price sensitivity but also enhance their brand loyalty. In their study investigating the effects of perceived CSR on employee attitudes, Glavas and Kelley (2014, p. 184) found that “perceived CSR (PCSR) is related to both job satisfaction and organisational commitment, and that this relationship is mediated by meaningfulness, while perceived organisational support (POS) mediates the relationship between PCSR and job satisfaction, but not organisational commitment.” Carmeli, Gilat, and Waldman (2007) found CSR to have a positive influence on organisational identification and employee commitment, all of which make firms to leverage their competitive efficiencies and financial performance. Equally, Jones (2010) found that organisations that engage in CSR activities are more able to retain their most valued employees than firms with no such activities. The study by Jones also found a positive correlation between CSR and organisational citizenship behaviours. Finally, the study by Gupta and Sharma (2016) found that CSR increases employee engagement with the firm, which in turn results in better organisational performance and superior business results as engaged employees not only advocate for the firm and its product and service offerings, but are also self-motivated to contribute to organisational success.
Other studies have failed to show a direct association between a firm’s engagement in CSR activities and business performance. In their symposium, Filatotchev and Nakajima (2014) provided the example of Korean Chaebol firms to show how organisations can use CSR for reasons other than improving their financial performance. In this example, the authors argue that these particular firms have high levels of ownership concentration and therefore utilise CSR to draw away attention from their corrupt financial exercises, such as accounting fraud, insider trading, and earnings manipulation. Similarly, Blair and Knight (2013) argued that while engaging in CSR activities may occasion potential benefits for the organisation’s competitiveness and financial performance, these benefits are often long-term and uncertain. Branco and Rodrigues (2006) utilised the traditional economic rationalist view proposed by Friedman (1970) to portray CSR as a cost, arguing that the main function of companies should be to earn profits for their respective stakeholders and, in doing so, optimise the value of the entities. Developing this work further, Chernev and Blair (2015, p. 1413) acknowledged that the most widespread argument for a negative association between CSR practices and financial performance “builds on the logic that relative to firms that do not engage in such activities, firms that engage in socially responsible activities incur additional costs for behaviours that have few measurable economic benefits.”
Corporate Social Irresponsibility
Research is consistent that “corporate irresponsibility events are temporally defined organisational actions that cause harm to stakeholders” (Mena et al. 2016, p. 720). At a broader level, corporate social irresponsibility entails the intentional or unintentional causing of harmful events to the organisation’s environment. These events, according to the available scholarship, produce substantial negative effects for stakeholders and therefore jeopardise the organisation’s legitimacy and can lead to additional adverse outcomes for the organisation, including regulatory fines or bankruptcy (Sarre, Doig, & Fiedler 2001). Some cases of corporate social irresponsibility that have captured public attention include “Nestlé’s marketing of baby formula in developing countries, Nike’s use of child labour, and Enron’s fraudulent accounting practices” (Mena et al. 2016, p. 720).
In their seminal study on the attributions of social corporate social irresponsibility, Lange and Washburn (2012) acknowledged that pervasive awareness or discernment that an organisation has acted in a socially irresponsible way can have adverse connotations for the entity since the success and survival of the firm largely depend on fulfilling normative expectations originating from its environment. As postulated by these authors, organisations that are perceived as bad actors in society risk to not only lose their customers, investors and employees, but also to face harsh consequences such as costly lawsuits, financial losses through settlements and declines in sales revenues, increases in capital outlays, market share corrosion, network partner loss, and other costs that are fuelled by a negative public reputation and/or image. This view is reinforced by Sarre, Doig, and Fiedler (2001), who argue that firms which fail in their responsibilities to keep employees, shareholders and the public at large from physical or environmental harm risk jeopardising their financial bottom line as well as their image and reputation. In their study, Keig, Brouthers, and Marshall (2015) found that higher intensities of official and unofficial corruption environments found within an organisation’s operating portfolio are associated with higher intensities of corporate social irresponsibility. Ormiston and Wong (2013) decried the limited empirical research available on the relationship between CSR, corporate social irresponsibility and business performance, but nevertheless acknowledged that the few research studies in existence have shown that CSR and corporate social irresponsibility can occur concurrently or in succession as is the case where organisations use CSR to offset previous corporate social irresponsibility.
Interpretation of the Literature
Drawing from the reviewed literature, it is evident that there is a paucity of empirical research studies on the impact of CSR on key variables that determine enterprise development, such as business performance, organisational success, and corporate social irresponsibility. Indeed, it has been noted that although CSR activities are often associated with positive societal implications and benefits, there still remains a gap in the literature on the consequences of CSR for firm shareholders. Consequently, it can be argued that in spite of its importance in the 21st century organisational environment, CSR is a phenomenon or concept with many answered questions. For example, it has been shown that although decades of research on CSR have focussed principally on establishing whether a positive association exists between CSR and corporate financial performance, the findings remain largely descriptive and fragmented. While some studies have found a positive relationship between CSR and business performance, many more have documented a negative relationship between the two variables, leading to the present confusion. As such, it is correct to take the position that the evidence obtained from existing studies regarding the relationship between CSR and enterprise development (represented by the dependent variables of business performance, organisational success and corporate social irresponsibility) is, at best, mixed.
Without a compelling “business case” for organisations to develop and implement CSR activities, significant queries still remain regarding the micro-foundations of CSR because the available organisational and economics-based theoretical models do not readily explicate why organisations continue to engage in these CSR practices. Consequently, drawing from the reviewed literature, it is clear that business practitioners may need to gain a deeper understanding on whether and how engaging in CSR activities affect organisational outcomes related to business performance and organisational success. The aim and objectives of the present study act to serve this purpose.
This chapter details the research methodology that was used to collect and analyse important primary data with the view to investigating the impact of CSR practices on enterprise development. The chapter describes the research questions, research approach and design, variable operationalisation, research setting, as well as the population and sample used conduct the study. Important methodological issues concerning data collection techniques, reliability and validity, ethical considerations, as well as data analysis are also described in this chapter.
Description of Research Questions
This research study was guided by the following research questions:
- RQ1: What is the impact of CSR practices on business performance?
- RQ2: How do CSR practices enhance and speed up the attainment of organisational success?
- RQ3: How does social irresponsibility lead to negative business outcomes?
Research Approach and Design
A quantitative research approach and a descriptive survey design were used to investigate the impact of CSR practices on enterprise development. Quantitative research has been described in the literature as “the numerical representation and manipulation of observations for the purpose of describing and explaining the phenomena that those observations reflect (Sekaran 2006, p. 187).” In the context of the present study, a quantitative research approach was justified since it provided the researcher with the leeway needed to empirically or statistically test the relationships existing between engaging in CSR practices and enterprise development. A descriptive survey design was used to collect primary data that were used to describe a population too large to observe directly (Balnaves & Caputi 2001; Nenty 2009). Research is consistent that survey research has the capacity to collect data from a sample of respondents by means of self-report; that is, the participants respond to a sequence of questions posed by the researcher (Creswell 2013). In the present study, data were collected through self-administered questionnaires distributed to participants using web-based protocols. The rationale behind the use of a descriptive survey design is anchored on the fact the design uses statistical techniques to provide a precise depiction or account of the characteristics of particular individuals, situations or groups that are critical to fulfilling the study aim and objectives (Sekaran 2006). In the context of the present study, therefore, the descriptive survey design provided an accurate portrayal of the opinions, knowledge and beliefs of participants regarding the impact of CSR practices on enterprise development.
Variable Description and Operationalisation
In this study, the independent variable comprised CSR practices while the dependent variable comprised enterprise development. Carroll’s Four-Part Model of CSR was used to operationalise CSR practices according to philanthropic responsibilities (contributing resources to the community with the view to improving the wellbeing of people), ethical responsibilities (obligation to do what is right, just and fair with the view to avoiding harm), legal responsibilities (playing by the rules), and economic responsibilities (ensuring that the organisation becomes profitable) (Das & Sanyal 2016). Enterprise development was operationalised in terms of business performance, organisational success, and social irresponsibility.
The study was conducted at ten organisations conducting business in the United Kingdom. Web-based resources entailing company profiles were used to ensure that these organisations were actively engaging in CSR activities at varied levels and scope of operations. Most of these organisations were listed in the London Stock Exchange, meaning that they were owned by several stakeholders. The average number of employees working in each of the listed organisations was 500. The average number of management professionals working in each of the listed organisations was 40.
Study Population and Sample
Burns and Grove (1993, p. 779) define a population as “all elements (individuals, objects and events) that meet the sample criteria for inclusion in a study.” Drawing from this definition, the population for the present study comprised all organisations operating in the food and agriculture industry in the United Kingdom. A purposive sample of 20 management executives (two in each organisation) working in the corporate governance units was selected from the 10 organisations that had been selected from a sampling frame of 50 organisations through the random sampling strategy. The researcher relied on the senior management of each of the 10 organisations to identify management executives with the right type of CSR knowledge for participation in the study. The simple random sampling technique used to identify participating organisations was justified as it ensured every organisation in the established sampling frame was given an equal chance of selection (Balnaves & Caputi 2001), while the rationale behind using a purposive sampling strategy to select the study participants was embedded in the fact that this strategy targets respondents with demonstrated understanding and knowledge of the main issues or phenomena under investigation (Bryman & Bell 2007). The justification behind selecting the food and agriculture industry is based on the understanding that this particular sector varies in its commitment to, and implementation of, CSR activities, with some firms investing heavily in such practices while others appear not to be bothered by the prospects of making such investments (Branco & Rodrigues 2006).
A web-based, self-administered questionnaire was selected as the data collection instrument for the study. A questionnaire, according to Burns and Grove (1993, p. 368), “is a printed self-report form designed to elicit information that can be obtained through the written responses of the subjects.” Specifically, the instrument was mailed to the sampled participants through their respective email addresses that had been provided by the senior management of participating organisations. The participants were requested to respond to the questions contained in the questionnaire and return the duly-filled instrument to the researcher through the provided email address. The web-based questionnaire contained items of different layouts, such as multiple choice questions asking either for a single choice or all that apply, dichotomous questions asking for “Yes” or “No” responses, self-evaluation questions measured on the 5-point Likert-type scale, and open-ended questions intended to elicit responses that could not be captured by the closed-ended questions. The researcher relied on the identification of the conceptual domain and the review of related CSR literature when developing questionnaire items in order to ensure the content validity of the instrument (Phillips & Starwaski 2008). The use of web-based self-administered questionnaire to collect primary data from the field was justified based on its capacity to remove the time and distance constraints that often lead to problems associated with mortality, its cost effectiveness and ease of application, and its capability to collect objective data by guaranteeing participant anonymity (Sekaran 2006).
Reliability and Validity
In quantitative research, reliability of the measuring instrument (questionnaire) is of particular significance in minimising errors that may be caused by faulty measurement parameters (Balnaves & Caputi 2001). Reliability, the notion that underscores the exactness and correctness of a measurement technique (Phillips & Starwaski 2008), demonstrates that the same set of data would have been collected each time in replicate research studies of an identical variable or phenomenon due to consistency of measurement (Creswell 2002). To ensure reliability of this research study, the researcher (1) pilot-tested the questionnaire instrument using a sample of five management executives and modified the items depending on the noted weaknesses, (2) synthesised the reviewed literature with the view to ensuring that the measures incorporated into the questionnaire instrument only captured data perceived to be of interest to the main research phenomenon, (3) employed multiple indicators to make sure that the data collected were not abridged, and (4) increased the range of measurement of the questionnaire instrument through the use of Likert-type questions (Creswell 2002).
Validity denotes the suitability, meaningfulness, and usefulness of the deductions, propositions and conclusions reached at by the researcher on the basis of the primary data or information collected from the field (Creswell 2002). Internal validity, the notion that exemplifies the soundness of an assessment, was attained by (1) employing a broad sample of content rather than a narrow one, (2) emphasising important material, (3) utilising suitable sampling strategies to select respondents for participation in the study, and (4) using a validated and reliable data collection instrument (Creswell 2002). External validity was achieved by enrolling an adequate sample size for the study with the view to ensuring that findings can be effortlessly generalised to other settings and populations.
Several ethical issues were addressed during the course of the research process; first, necessary approvals to conduct the research study were sought from the relevant department at the university so that they could be presented to the organisations and participants selected for the purpose of collecting primary data. An informed consent form was developed with detailed information that the respondents were guaranteed certain rights, agreed to participate in the research process, and recognised that their rights were safeguarded under the binding document. Lastly, the anonymity of respondents was guaranteed by requesting them not to include their names or positions on the questionnaire, while the ethical principle of self-determination was maintained throughout the study by treating participants as independent agents and also by allowing them to deliberately or voluntarily elect to participate or not.
Data collected from the field were cleaned, coded and entered into the Statistical Package for Social Sciences (SPSS, version 21) for analysis using descriptive statistics. Descriptive statistics were used to investigate the impact of CSR practices on enterprise development (business performance, organisational success, and social irresponsibility) based on percentages, mean scores, and standard deviations of various items listed in the questionnaire. As noted by Balnaves and Caputi (2001), descriptive statistics were preferred in the present study context as they not only use measures of central tendency (e.g., mean scores) to describe the most typical values in a data set but also utilise measures of dispersion (e.g., variance and standard deviation) to describe the variability of the responses given. The resultant data were further harnessed, analyzed and presented using the many statistical presentation tools included in the SPSS program, such as bar charts and pie charts.
Data Analysis and Discussion
This study was focussed on the urgent need for organisations to develop a comprehensive understanding of the impact of CSR on business performance, organisational success, and corporate social irresponsibility. It was felt that these dependent variables could offer direction on how CSR influences enterprise development. Towards the attainment of this broad objective, a survey was conducted on a sample of 20 participants sourced from 10 organisations operating in the food and agriculture industry in the United Kingdom. This section details how the analysis was done through the use of descriptive statistics. The section also discusses how the results of the analysis deviate from, or confirm the findings of prior works done on the relationship between CSR and enterprise development. It is important to note that the findings are presented according to the stated research questions.
Of the 20 participants that were earmarked for participation in this study, the researcher received duly completed questionnaires from 11 participants, representing a 55% response rate. The average response rate was expected, bearing in mind that the questionnaire instrument was administered using web-based protocols. Five (45.5%) of the 11 participants were male, while six (54.5%) were female. The mean number of years that the participants had worked in the sampled organisations was 9.1, while the mean number of years that the organisations had been engaging in CSR activities was 15.7. A descriptive analysis of the CSR activities that the sampled organisations were engaged in showed that most firms in the food and agriculture industry are interested in the adoption of code of ethics (98%), philanthropy (76%), protection of environmental pollution (72%), and equal and humane treatment of employees (68%). The rest of the distribution is shown in Figure 4.2.1 below.
Figure 4.2.1 shows that, although most firms are interested in the adoption of code of ethics as part of their CSR activities, they are nevertheless not adopting the international standards for CSR certification (ISO 26000).
A descriptive analysis of the estimated amount of money that the respective organisations committed to CSR activities on a yearly basis revealed a mean estimate of $98,538. In line with the low amount of money committed to CSR activities by the organisations, seven of the respondents (63.6%) ranked their organisation’s engagement in CSR activities as merely satisfactory. Here, it is important to note that three (27.3%) of the participants ranked their oganisation’s engagement in CSR activities as poor, while one (9.1%) ranked the engagement as very poor. The reasons provided for the poor ranking included lack of adequate financial resources, lack of senior management support in CSR activities, and lack of commitment by employees to implement CSR activities.
Statement of Results
Descriptive statistics were used to investigate the impact of CSR on enterprise development based on the stated research questions. Since it was difficult to measure the impact directly, the researcher employed a number of variables and concepts that served to show how CSR influences or impacts enterpise development. These variables and concepts formed the foundation of the analysis. The following subsections show the main study findings based on the stated research questions.
CSR and Business Perfomance
Three in four respondents (76.2%) demonstrated the percpetion that CSR acts as a core component aimed at enhancing the business performance of their respective firms, while half (54.5%) of the participants said that their organisations often employ the CSR concept to achieve competitive advantages in their operating environments. The rest of the distribution is shown in the figure below.
The figure last page rightly shows that most businesses engage in CSR activities due to performance related issues; that is, to improve business performance (76.2%) and achieve competitive advantages (54.5%). The figure also shows that most businesses are less concerned about using CSR to offset past corporate social irresponsibility or merely because they are financially stable and have additional resources to spend.
The variable of motivation towards engaging in CSR was used to assess the perceptions of stakeholders concerning the impact of CSR on business performance. When participants were asked to identify what they believed were the major motivations that drove their companies to engage in CSR, the top five drivers included increasing the organisation’s value system (92%), enhancing the goodwill and reputation of business (78%), protecting the environment (76%), enhancing competitive advantages (68%), and helping the needy/poor people (55%). The rest of the distribution is shown in the Figure below:
The figure last page shows that three of the five foremost motivating factors (increasing the organisation’s value system, enhancing the goodwill and reputation of business, and enhancing competitive advantages) identified by the respondents are directly related to business performance. However, it is also important to note that only 28% of respondents identified the need to improve financial performance as a motivating factor, while only 32% said that CSR activities in their respective firm were motivated by the need to ensure the economic sustainability of the firm. Overall, however, the analyses and findings included in this section serve to show the impacts of CSR on business performance.
CSR and Organisational Success
Participants were asked to indicate the level to which they either agreed or disagreed with selected statements that were used to measure the relationship between CSR and organisational success on a five-point-licket type scale (1=strongly disagree; 5=strongly agree). The descriptive findings to these statements are shown in the following table:
Table 22.214.171.124: Impact of CSR on Variables that Measure Organisational Success
|Statement (N=11)||(n)||Mean value||Standard deviation|
|“CSR sustains a good corporate image and reputation”||9||4.5320||0.1750|
|“CSR reinforces a company’s brand”||10||3.5901||0.5210|
|“CSR positively influences customer perceptions of the functional performance of an organisation’s product and service offerings”||8||3.2850||1.4201|
|“Customers are more willing to advocate for organisations that engage in socially responsible practices and also to shield them against censure or disparagement”||9||4.8210||0.1890|
|“CSR diminishes consumers’ price sensitivity”||6||2.0520||0.1231|
|“CSR enhances employee job satisfaction”||9||3.8901||0.4210|
|“CSR enhances employee commitment and engagement with the firm”||10||3.6230||1.45201|
|“CSR enhances the retention of the most valued employees”||9||3.5012||0.6210|
|“CSR enhances financial performance and/or business sustainability”||8||1.9230||1.54210|
|“There is a positive relationship between CSR and organizational citizenship behaviours”||9||3.4210||0.32101|
|“CSR should be viewed as a cost to the organization”||7||1.8901||1.6218|
Overall, most of the findings demonstrated that the participants either agreed or strongly agreed with the statements used to conceptualise the relationship between CSR and organisational success. Specifically, eight (72.7%) of the participants strongly agreed with the statement that CSR has the capacity to sustain a good corporate image and reputation, while seven (63.6%) strongly agreed with the assertion that customers are more willing to advocate for organisations that engage in socially responsible practices and also to shield them against censure or disparagement. Overall, the five topmost ways through which CSR activities enhance and speed up the attainment of organisational success, according to the participants, include making sure that customers become more willing to advocate for CSR-conciuos companies and also shielding such companies against censure, ensuring that companies are able to sustain a good corporate image and reputation, enhancing employee job satisfaction, reinforcing a company’s brand, as well as enhancing employee commitment and engagement with the firm. However, it is important to note that seven (63.6%) of the respondents strongly disagreed with the assertion that CSR has the capacity to enhance financial performance and/or business sustainability. Additionally, six (54.5%) strongly disagreed with the statement that CSR should be viewed as a cost to the organisation.
Corporate Social Irresponsibility and Negative Business Outcomes
Lastly, participants were requested to indicate the level to which they either agreed or disagreed with several statements that focussed on illuminating the relationship between corporate social irresponsibility and negative business outcomes. A descriptive analysis of these statements is presented in Table 126.96.36.199, next page.
Table 188.8.131.52: Relationship between Social Irresponsbility and Business Outcomes
|Statement (N=11)||(n)||Mean value on 1-5 scale||Standard deviation|
|“organisations utilise CSR to draw away attention from their corrupt financial exercises, such as accounting fraud, insider trading, and earnings manipulation”||9||1.2109||0.00890|
|“Organisations perceived as bad actors in society risk to lose their customers, investors and employees”||10||4.6210||1.2560|
|“Organisations perceived as bad actors in society risk to face harsh consequences in terms of costly lawsuits, financial losses through settlements and declines in sales revenues, increases in capital outlays, market share corrosion, and network partner loss”||11||4.5201||0.21785|
|“Firms which fail in their responsibilities to keep employees, shareholders and the public at large from physical or environmental harm risk jeopardising their financial bottom line as well as their image and reputation”||11||3.6201||1.24567|
From the analysis done on the above table, it is evident that most participants were in agreement with the assertion that social irresponsibility leads to negative business outcomes through losing critical customers, investors and employees, jeopardising their financial bottom line as well as their image and reputation, and risking to face harsh consequences in terms of costly lawsuits, financial losses through settlements and declines in sales revenues, increases in capital outlays, market share corrosion, and network partner loss. However, eight (72.7%) of the participants strongly disagreed with the assertion that their respective organisations engaged in CSR as a way of drawing attention from their corrupt financial practices.
This research study has provided empirical evidence to demonstrate that the five topmost motivators for organisations to engage in CSR include increasing the organisation’s value system, enhancing the goodwill and reputation of business, protecting the environment, enhancing competitive advantages, and fuflling responsibility towards society. These motivators underscore the impact of CSR on business perfpromance, showing that a firm which engages in CSR activities is more likely to increase its value system, enhance its goodwill and reputation among consumers, employees and other stakeholders, as well as enhance its competitive advantages. These findings are consistent with those of Christensen, Silvola, and Silvabalan (2014) and Bhimani, Silvola, and Sivabalan (2016), who used secondary sources and primary field data to demonstrate the impact of CSR on business performance. However, it is also important to note that very few respondents identified the need to improve financial performance as an impact of CSR on business performance, while only 32% said that CSR activities in their respective firms were motivated by the need to ensure the economic sustainability of the firm. These two findings go against the main propositions of the Stakeholder Theory, particularly the one acknowledging that CSR produces positive correlations among stakeholders with the view to enhancing or improving prospective firm cash flows and organisational performance (Mikolajek-Gocejna 2016).
Furthermore, this research study has been successful in demonstrating that the main ways through which CSR activities enhance and speed up the attainment of organisational success include making sure that customers become more willing to advocate for CSR-conciuos companies and also shielding such companies against censure, ensuring that companies are able to sustain a good corporate image and reputation, enhancing employee job satisfaction, reinforcing a company’s brand, as well as enhancing employee commitment and engagement with the firm. These findings have been supported by other previous studies. For example, the study by Lu, Wang, and Lee (2013) had found that organisations which implement CSR practices experience stable improvement in operating performance even during economic recessions since the practices bolster the organisations’ competitive advantages by helping them to develop a positive image and/or brand name with consumers, investors, bankers and suppliers. Similarly, the study by Green and Peloza (2011) found that an organisation’s reputation for engaging in socially responsible activities tends to not only diminish customers’ price sensitivity but also enhance their brand loyalty, while that of Jones (2010) found a positive correlation between engaging in CSR activities and variables that spur organisational success, such as high levels of employee retention, employee commitment and engagement, and organisational citizenship behaviours. However, it is important to note most of the participants in this particular research study disagreed with the assertion that CSR has the capacity to enhance financial performance and/or business sustainability, and that CSR should be viewed as a cost to the organisation.
Lastly, this research paper has been successful in providing empirical evidence on how corporate social irresponsibility may lead to negative business outcomes for organisations. Indeed, many participants were in agreement that socially irresponsible behaviours on the part of the organisation often lead to negative business outcomes through losing critical customers, investors and employees, jeopardising their financial bottom line as well as their image and reputation, and risking to face harsh consequences in terms of costly lawsuits, financial losses through settlements and declines in sales revenues, increases in capital outlays, market share corrosion, and network partner loss. These findings are consistent with those of Sarre, Doig, and Fiedler (2001) and Mena et al. (2016). However, it is important to note that a substantial number of participants in this particular study did not agree with the assertion that their respective organisations engaged in CSR as a way of drawing attention away from their corrupt financial practices. The penance mechanism proposed by Kang, Germann, and Grewal (2016) asserts that organisations engage in or implement CSR activities as a form of penance or reparation aimed at offesetting previous incidences of corporate social irresponsibility.
Conclusions and Recommendations
This research study was focussed on the need to undertake an empirical investigation of the impact of CSR on enterprise development. Specifically, the research study aimed at investigating the impact of CSR on the main dependent variables that determine enterprise development in contemporary settings, namely business performance, organisational success, and corporate social irresponsibility. The study utilised a quantitative research approach and a descriptive research design to collect primary data from the sampled participants, while various descriptive statistical tests were conducted on the data with the view to providing responses to the main research questions. Overall, the study sampled 20 participants from the food and agriculture industry in the United Kingdom, though only 11 duly completed questionnaires were returned.
In the context of the first research question, the study was successful in demonstrating that some of the most important impacts of CSR on business performance include increasing the organisation’s value system, enhancing the goodwill and reputation of business, protecting the environment, enhancing competitive advantages, and fuflling responsibility towards society. In the context of the the second research question, the study was effective in showing that the foremost ways through which CSR activities enhance and speed up the attainment of organisational success include making sure that customers become more willing to advocate for CSR-conciuos companies and also shielding such companies against censure, ensuring that companies are able to sustain a good corporate image and reputation, enhancing employee job satisfaction, reinforcing a company’s brand, as well as enhancing employee commitment and engagement with the firm. Lastly, in the context of the third research question, this research study was successful in demonstrating that social responsibility leads to negative business outcomes through losing important customers, investors and employees, jeopardising their financial bottom line as well as their image and reputation, and risking to face harsh consequences in terms of costly lawsuits, financial losses through settlements and declines in sales revenues, increases in capital outlays, market share corrosion, and network partner loss.
Implications for Practice
There is an urgent need for organisations to have a clear understanding of the benefits that arise from engaging in CSR activities as well as the losses that may emanate from drifting into socially irresponsible corporate behaviour. By undertaking a well-structured empirical investigation, this research study has provided the needed insights for organisations to make a well-informed determiniation on whether they should use their scarce financial resources to fund CSR activities and the benefits they stand to attain in terms of improved business performance and organisational success. These variables are primary in an organisation’s attempt to achieve competitive efficiencies in contemporary business environments characterised by stiff competition and dynamism, hence their importance. Additionally, business practitioners are now in a better position to understand the consequences of their CSR behaviors and what their firms stand to lose in the event that they engage in socially irresponsible behavior. In recent years, many firms have found themselves on the receiving end for engaging in socially irresponsible behaviour, such as accounting fraud and insider trading practices. This reaserch study has reinforced understanding of some of these issues by developing a nuanced relationship between engaging in socially irresponsible corporate behaviour and negative business outcomes.
Although the researcher was personally convinced that the quantitative approach selected was quite effective in collecting representative data for this research study, it is possible that the sample selected for participation in this study deviated from the overall population of firms implementing CSR practices in the United Kingdom, hence skewing the study findings due to sampling biases. Additionally, the field data comprised ten organisations, with a limited number of management executives providing the sought after responses from each organisation. It is important to note that the views, attitudes and perspectives of these participants cannot extend to those held generally and broadly by other management executives in the organisations studied or across the entire population of British organisations operating in the food and agriculture industry and implementing CSR practices within their respective communities. Lastly, financial and time constraints could have interfered with the researcher’s desire to undertake a more expansive, inter-sectoral study with the view to investigating the impact of CSR on business performance, organisational success, and corporate social irresponsibility.
Future Research Areas
Based on the findings of this study, it is recommended that future empirical research studies be undertaken to understand the causative relationships between a firm’s engagement in CSR activities and its capacity to enhance financial performance and/or business sustainability. Additionally, it is recommended that future research studies should be conducted to understand the dynamics that come into play to make employees internalise CSR as a core domain towards the realisation of organisational competitive advantages.
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