responsibility isn’t expected only from the large corporations. If commercial
activities are perceived to be unethical or destructive, it doesn’t matter what
type of business enterprises are engaged in them. However, publicly traded
corporations are the target of most discussion about social responsibility because
of the fact how they are created and managed.
Corporate social responsibility advocates note that since corporations are “fictitious persons,” created by law and sustained by government grants of limited liability for individual shareholders, they have obligations to society that surpass those of sole proprietorships or partnerships. One such scholar, business professor Thomas M. Jones of the University of Washington in Seattle, explained that “the corporation which acts in a responsible manner may simply be paying society back for the social costs of doing business, costs for which the firms rarely receive an invoice.”
This view is hardly new. In fact, it was accepted doctrine in the United States and other Western societies until the nineteenth century that the right to conduct business in the corporate form was a matter of royal or state prerogative, not of private economic interest. Monarchs issued charters to public-stock corporations that promised public benefits, such as exploration and colonization of the New World. Individuals could own shares of the corporation, and sell them (with some limitations), but the purpose was not merely to serve the interests of stockholders. In the American colonies, the earliest business corporations established during the eighteenth century were founded to perform such services as building transportation infrastructure, supplying water, fighting fires and providing insurance. These early corporations were rare and closely regulated in size, scope and property holdings.
“Investing in Corporate Social Responsibility leads to enhancement in customer
Ans. Corporate social responsibility (CSR) activities have the potential to create several distinct forms ofvalue for customers. It is the customer perception ofthis value that mediates the relationship between CSR activities and subsequent financial performance. By categorizing major CSR activities and the different types of value each can create, this report offers a number of practical recommendations to business leaders embarking on CSR programs for their companies.
Investments in CSR activities are under scrutiny. Boards and shareholders are increasingly demanding that outcomes from these investments be measured to understand if and how they positively impact the profitability of the firm. Not surprisingly, a significant amount of research has been undertaken to understand the relationship between CSR and profitability.
Due to the importance of customers among business stakeholders, marketing research that examines the effects of CSR on profitability is particularly informative. In particular, this research shows that CSR leads to outcomes such as increased customer loyalty, willingness to pay premium prices, and lower reputational risks in times of crisis. Each of these marketing outcomes in turn has the potential to support increased profitability.
However, the research findings in question are often equivocal and offer business leaders limited guidance when it comes to choosing and implementing specific CSR activities. In fact:
(1) The relationship between CSR activities and financial performance is typically affected by many other mediating variables, which are not always thoroughly considered by researchers; and
(2) The metrics
used to define CSR vary widely among researchers.
To understand how CSR can impact profitability, this report focuses on customer value as a variable linking CSR activities and the firm’s financial performance. This report argues that CSR activities have the potential to create several distinct forms of value for customers. It is the customer perception of (and subsequent response to) this value that mediates the relationship between CSR activities, positive marketing outcomes, and subsequent financial performance. By categorizing major CSR activities and the different types of stakeholder value each can create, this report provides guidance for business leaders embarking on CSR programs for their companies. For this reason, a section of the report is dedicated to a number of practical recommendations to board members and senior executives.
CSR Activities and Customer Value; Corporate social responsibility has been defined as “a business organisation’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm’s social relationships.” It consists of specific firm investments called “activities.” Collectively, overtime, these activities can lead to a reputation for social responsibility— a valuable business asset of its own.
A recent review of financial metrics deployed to calculate the business case for CSR found 42 unique CSR activities (Table 1) used by analysts and researchers over four decades of studies of the subject. Within this broad array of activities, perception by stakeholders naturally varies, as socially responsible corporate behaviour may mean different things to different people at different places and times. For example and in general terms, research shows that CSR in the form of community or diversity programs is more likely than CSR in the form of governance, employee relations, or product relations to provide insurance against negative events affecting the reputation of the corporation.
customer value of CSR: Clearly, stakeholders must perceive value in a certain
CSR activity to support the firm’s engagement in it. This is particularly true
for the customer, a key stakeholder for any business enterprise.
An effective model to examine the potential customer value creation of CSR activities defines value as an interactive, relativistic preference experience. Value is interactive because it can be created only when a firm and its customer come together. Value is based on preference because each customer responds to a product, service, or corporate initiative based on her personal, subjective taste. Finally, value is relativistic because each customer’s perception is influenced by external factors relative to the environment in which the customer lives (e.g. sensitivity to certain social issues depends on the level of education and the intellectual or experiential exposure of the customer to the issue).
Table 2: The Multi-faceted Customer Value of CSR Activities in the Form of Organfc Agricultural Practices
|Multi-faceted Customer||Intrinsic value|
|Value||(Le. does not require the involvement of a third party to be enjoyed)||
does require the involvement of a
|Self-oriented value||Quadrant 1||
|(i.e., only directly enjoyed||Efficiency or excellence||status esteem|
|by the customer)||(e.g. organics as a healthier product, free from pesticide residues or other contaminants.)||(e.g., organics as a way to represent to others one’s concern for the environment)|
|Other-oriented value||Quadrant 2||4|
|(i.e. not only directly||Joy or aesthetics||Ethics|
|enjoyed by the customer)||(e.g. organics as a simple product, representing a “slow-food” quality of living.)||
(e.g., rganics as a way to contribute to environmental conservation.)
The model is illustrated in Table 2, through its application to CSR activities in the form of organic agricultural practices. Each of the four quadrants outlined in the model represents potential types of customer value resulting from a certain CSR activity:
(1) Self-oriented Intrinsic Value: The efficiency or excellence of the product or service offered by the business.
(2) Other-oriented Intrinsic Value: The personal joy or aesthetic appreciation resulting from consuming the product or using the service.
(3) Self-oriented Extrinsic Value: The status or esteem associated with consuming the product or using the service.
(4) Other-oriented Extrinsic Value: The ethical or spiritual benefit of the product consumption or service use.
The model shows how a certain consumption behaviour can conlribute to multiple or even all types ofvalue, and that the coexistence of these value types in a certain SR activity is the norm rather than the exception.
Ultimately, as the model suggests, business leaders should be mirdful of all four types of value that may be present in the same CSR activity.