Beyond Good Citizenship: Identifying and Measuring Benefits of CSR
Corporate social responsibility (CSR) is practiced by many firms for a variety of reasons and is drawing increased attention. Overall, businesses recognize that there are potential benefits to being socially responsible, but often these benefits are intangible and challenging to measure.
Marty Stuebs, associate professor of Accounting, and his coauthor, Li Sun, of Miller College of Business at Ball State University, set out to discover if there is a positive correlation between CSR and improved firm reputation that could be measured. Their findings, "Corporate Social Responsibility and Firm Reputation," were published in the Journal of Accounting, Ethics & Public Policy in 2011.
"In today's business environment, we know there are benefits to investing in corporate social responsibility, but identifying these benefits can be challenging," Stuebs said. "We want to identify the benefits. What we're asking here is whether improved company reputation is one of the benefits from socially responsible activities."
Stuebs and Sun started out by looking at prior research done by Vilanova et al. in 2009 ("Exploring the Nature of the Relationship Between CSR and Competitiveness"), which models how CSR affects financial performance and other dimensions of competitiveness. Stuebs and Sun defined corporate social responsibility as businesses considering the interests of society and taking responsibility for the impacts of their activities on stakeholders in various aspects of operations. CSR goes beyond good citizenship, in that it asks businesses to voluntarily take steps beyond statutory obligations to improve society's quality of life. The main focus of socially responsible corporations is not solely profit maximization.
Because investments in social responsibility are not solely focused on profit, they are sometimes considered controversial. It is sometimes argued that they can increase cost and hurt performance, while competing with activities that can increase profits.
"We believed that those arguments could be overcome by showing that a socially responsible firm could actually gain financially while doing the right thing," Stuebs said. "We believed we could show fewer labor problems, fewer complaints from the community and improved relationships with stakeholders."
Stuebs and Sun used a sample of highly reputable firms from Fortune's Most Admired Companies list and compared them to firms not on the list. They also used data provided by KLD Research and Analytics, Inc., a company that has been actively collecting CSR data since 1991 on approximately 80 variables in seven qualitative areas plus several controversial issues including alcohol, gambling and tobacco activities. They then compared the two lists to measure the relationship between socially responsible activities and reputation.
"We found that there is a strong positive relationship between a company's reputation and its socially responsible practices," Stuebs said. "A company can do well by doing good, and doing good is rewarded."
Stuebs, who teaches accounting ethics, has been able to incorporate his research into his daily classroom lessons.
"I've noticed several crossovers from my research to what I'm teaching," he said. "I try to talk about my research so that I can get my students to think about acting responsibly, not only professionally in business, but personally as well. For example, students can apply these findings to their own personal lives. They can consider how their responsible actions have affected their own reputation and relationships. I believe this contributes to their personal and professional development-utilizing their God-given talents as contributing members of our community."
Stuebs is continuing his CSR research by studying the effect that it has on attracting better employees and improving employee productivity.
"This work does have a spiritual dimension for me," he said. "When we act in a socially responsible manner toward others, we are acting more consistent with the way God intends us to live our lives. In that way, I hope that my research brings some glory to God."