Why Companies Practice Corporate Social Responsibility

For two decades now, the question of why companies practice corporate social responsibility (CSR) has gripped practitioners, policy makers, and academics alike. Strong interest in this question has been driven by the increasing engagement of companies worldwide in all manner of CSR activities, from reducing carbon emissions to increasing the gender and racial diversity of boards of directors.

The breadth of almost 200 surveys that have queried business leaders in over 70 countries on their CSR motivations offers evidence of the high level of interest in this topic. Research has been conducted by nearly every blue-chip consultancy, including McKinsey, EY, BCG, PwC, KPMG, Deloitte, and Accenture, as well as by major political bodies, such as the United Nations, the European Commission, and the U.S. Chamber of Commerce.

What can be learned about companies’ CSR motivations from these high-profile surveys? Emerging from our recent meta-analysis is a picture of CSR as a halo strategy: By presenting themselves as true believers in CSR (saints), businesses seek to improve the overall corporate image (the halo) and expect broad benefits from diverse stakeholders to follow (the warm glow). Below, we discuss in turn each of these three features using this religious metaphor.

The Saint

Figuratively speaking, businesses have joined the church and now sing in the choir with activists and governments about the goodness of CSR. Surveys of CSR motivations, at least, support this metaphor. The motivations that businesses are most likely to select in these surveys are those that portray CSR as a matter of the company’s own values, ethics, morality, or culture — normative motivations. This finding is apparent in surveys of industries as diverse as electric power in India and fishing in Norway.

Internally driven normative motivations rank higher in surveys than another abstract type: political motivations, which position CSR as an effort to manage power relations — for example, by avoiding fines or reducing activist pressure. In fact, any given normative motivation, when appearing in the same survey with any given political one, is expected to rank higher about 83% of the time. In other words, no one is making companies practice CSR; they claim to value CSR themselves. The glow of virtue emanates from within.

Likewise, normative motivations win against abstract instrumental motivations, which position CSR as bringing rewards to companies themselves, such as lower capital costs and higher employee morale.