What seems to be the primary motivation in this case for an increased interest in social responsibility?

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journal article

The Academy of Management Review

Vol. 32, No. 3 (Jul., 2007)

, pp. 836-863 (28 pages)

Published By: Academy of Management

https://www.jstor.org/stable/20159338

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Abstract

We provide a multilevel theoretical model to understand why business organizations are increasingly engaging in corporate social responsibility (CSR) initiatives and thereby exhibiting the potential to exert positive social change. Our model integrates theories of organizational justice, corporate governance, and varieties of capitalism to argue that organizations are pressured to engage in CSR by many different actors, each driven by instrumental, relational, and moral motives. We conclude by high-lighting empirical questions for future research and discussing some managerial implications.

Journal Information

The Academy of Management Review, now in its 26th year, is the most cited of management references. AMR ranks as one of the most influential business journals, publishing academically rigorous, conceptual papers that advance the science and practice of management. AMR is a theory development journal for management and organization scholars around the world. AMR publishes novel, insightful and carefully crafted conceptual articles that challenge conventional wisdom concerning all aspects of organizations and their role in society. The journal is open to a variety of perspectives, including those that seek to improve the effectiveness of, as well as those critical of, management and organizations. Each manuscript published in AMR must provide new theoretical insights that can advance our understanding of management and organizations. Most articles include a review of relevant literature as well. AMR is published four times a year with a circulation of 15,000.

Publisher Information

The Academy of Management (the Academy; AOM) is a leading professional association for scholars dedicated to creating and disseminating knowledge about management and organizations. The Academy's central mission is to enhance the profession of management by advancing the scholarship of management and enriching the professional development of its members. The Academy is also committed to shaping the future of management research and education. Founded in 1936, the Academy of Management is the oldest and largest scholarly management association in the world. Today, the Academy is the professional home for more than 18290 members from 103 nations. Membership in the Academy is open to all individuals who find value in belonging.

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Companies are increasingly ramping up their focus on social responsibility, whether they are championing women’s rights, protecting the environment, or attempting to obliterate poverty, on local, national, or global levels. From an optics perspective, socially responsible companies project more attractive images to both consumers and shareholders alike, which serves to positively affect their bottom lines.

Key Takeaways

• Social responsibility empowers employees to leverage the corporate resources at their disposal to do good.
• Being a socially responsible company can bolster a company's image and build its brand.
• Social responsibility programs can boost employee morale in the workplace and lead to greater productivity, which has an impact on how profitable the company can be.
• Businesses that implement social responsibility initiatives can increase customer retention and loyalty.
• Socially responsible companies have the opportunity to stand out from the competition because they cultivate superior and positive brand recognition.

Corporate Social Responsibility (CSR) Definition

Customers Matter

Embracing socially responsible policies goes a long way toward attracting and retaining customers, which is essential to a company’s long-term success. Furthermore, many individuals who know that part of a company's profits will be channeled toward social causes near and dear to them will gladly pay a premium for goods.

Companies can likewise witness increased foot traffic if they're committed to supporting the local community. For example, banks that dispense loans to low-income households are apt to see an uptick in business as a direct result.

Increases Employee Motivation

Social responsibility is an effective tool to increase employee engagement. These companies tend to attract employees who are eager to make a difference in the world—in addition to simply collecting a paycheck. With large companies, there is strength in numbers, and collective employee efforts can achieve substantial results, which increases workplace morale and boosts productivity.

According to Harvard Business School, nearly 70% of employees say they would not work for a company without a strong purpose. Ninety percent of employees who work at companies with a strong sense of purpose say they’re more inspired, motivated, and loyal, and 92% of employees who work at a socially responsible company say they would be more likely to recommend their employer to those in their network who are looking for a job.

Research shows that employee engagement translates directly to a company's overall performance and bottom line: engaged employees have a 17% increase in productivity, are 21% more profitable, and can have 41% lower absenteeism.

To sum it all up, even a small investment in corporate social responsibility initiatives can increase employee engagement and have an impact on how profitable the company can be.

Community Support and Customer Loyalty

Social responsibility works as a platform for companies and consumers alike to make a positive impact on local and global communities. Businesses that implement a social responsibility initiative that’s in line with their values have the opportunity to increase customer retention and loyalty.

Research shows that 87% of American consumers are more likely to buy a product from a company that advocates for an issue they care about, and 76% would refuse to purchase a product if they found out a company supported an issue contrary to their beliefs.

Community-oriented companies often enjoy a leg up on their competition as well, thanks to superior brand imaging. For example, Tesla Inc. (TSLA) CEO Elon Musk has successfully attracted environmentally-minded consumers with his line of cutting-edge electric cars and green automotive products.

104,975,528

Lives impacted globally by the socially responsible initiatives and community support enacted by TOMS, the popular shoe brand, in the 15 years since its inception.

Examples of Corporate Social Responsibility

Coca-Cola Company (KO)

In 2010, Coca-Cola started the 5by20 initiative to empower women across the globe. The company stated:

Through 5by20 programs around the world, we equip women entrepreneurs to overcome social and economic barriers by providing business skills training, access to financial services, and assets, and connections with peers and mentors. The women participating in 5by20 work in roles across our value chain include retailers, suppliers, producers, artisans, and more.

Visa Inc. (V)

Through its financial inclusion program, Visa has developed innovative ways of bringing digital cash to places in the world where the financial infrastructure doesn't exist or for people who don't have access to the financial system, like residents of many developing countries. The company stated:

Today, about half the adult world lives in the informal economy, dealing exclusively in cash. To be one of these estimated 2 billion people is to face financial barriers that make life risky, expensive, and inefficient. Financial inclusion helps put people on a path out of poverty, creates productive, empowered citizens, fosters business opportunities, and fuels economic growth.

What Is the Difference Between ESG and Social Responsibility?

Both terms refer to the social responsibilities of businesses. Though corporate social responsibility (CSR) holds businesses accountable for their social commitments in a qualitative manner, environmental, social, and governance (ESG) helps measure or quantify such social efforts. Socially conscious investors use ESG criteria to screen potential investments.

How Can a Company Be More Socially Responsible?

Even the smallest initiative can have an impact on a community. Donating money or resources to charities can make a huge difference, although small companies and startups may not have the ability to do so. Companies can start by organizing small fundraising events, encouraging volunteering, establishing a social mission and clear goals, implementing education programs for employees, or joining efforts with businesses with a similar mentality.

What Are the Benefits of Corporate Social Responsibility?

Embracing CSR increases customer retention and loyalty, increases employee engagement, improves brand imaging, attracts investment opportunities and top talent, and makes a difference for bottom-line financials.

The Bottom Line

Socially responsible companies cultivate positive brand recognition, increase customer loyalty, and attract top-tier employees. These elements are among the keys to achieving increased profitability and long-term financial success.