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. Normative motivations rank higher in this scenario 73% of the time.

The preeminence of normative motivations is robust: In all regions of the world, businesses ascribe their CSR efforts mostly to their own desire to benefit society and the planet. CSR is one of the great consensus movements of our time, not only among the citizenry, but also among companies — globally, across industries, and throughout the corporate hierarchy.

The Halo

CSR is not pure altruism, however. Companies generally do expect rewards from their good deeds. These rewards, importantly, may even depend on noble motivations. Consumers, for example, crave authenticity and want to buy products from companies whose hearts are in the right place. Consumers may even research companies to discern which ones are saints and which ones are bearing false witness.

As for the strategic benefits of CSR, a very different finding emerges when we peer beneath the surface of normative, political, and instrumental motivations. When we examine concrete examples of these abstract types, we see that the most-reported CSR motivation is actually an instrumental one: burnishing the company image, brand, or reputation. When stripped from other instrumental motivations, image motivations beat even normative ones almost two out of three times. They are the most selected motivation in all subsamples — across time (2003-2020), geography (developed versus developing countries), company size (multinationals versus small and medium-sized enterprises), survey respondents (senior managers versus lower-level workers), and types of survey producers (academics versus practitioners).

The Warm Glow

The halo of CSR bathes the entire enterprise in a favorable light and anoints it as having good character. According to experimental research, when companies are considered virtuous, they are also thought to be competent — even though these qualities are distinct. Similarly, companies that practice CSR are punished less by consumers for scandals, because consumers impute good intentions to these companies, despite any unfortunate events that may have transpired.

This perception that a company has good character can deliver many benefits. Studies of CSR, considered holistically, portray it as an almost miraculous strategy whose rewards are myriad — including improved customer satisfaction, brand loyalty, and purchase intent; higher worker morale, company identification, and productivity; greater access to funding; lower risk; reduced regulatory burdens; and enhanced trust from suppliers.

The surveys we analyzed suggest three ways that CSR advances many stakeholders’ objectives simultaneously. First, across all of the surveys, their designers presented no fewer than 40 distinct benefits to respondents as options to select as plausible CSR motivations. In the imaginations of survey designers, at least, the possibilities seem almost endless. Second, companies rank more highly those CSR motivations that mention aggregate rather than specific stakeholders; compare “improve stakeholder relations,” for instance, with “improve investor relations.” Lastly, companies more highly rank CSR motivations that express broad rather than concrete benefits; compare “competitive advantages” with “supplier access.” The halo, in other words, is not a targeted beam but a diffuse radiance.

The Implications

An army of researchers has toiled for two decades to survey companies’ CSR motivations because they provide valuable information: They tell us why companies practice CSR and can help us predict and influence company behavior. In the end, the surveys tell us that companies practice CSR mainly because they want to burnish their own images.

This motivation presents a lever of change. Companies’ intentions to use CSR to bolster their own images can be exploited to increase social welfare: Company images are potential targets for activists who want to punish CSR laggards. Indeed, our findings suggest a converse dynamic: By creating satirical greenwashing awards and subverting companies’ own brand identities to name and shame them, for instance, concerned stakeholders can threaten companies with a range of negative outcomes, such as higher capital costs and a reduction in consumer purchases. By harnessing company motivations, stakeholders can gain the traction to further advance the CSR field.