What to Make of Unprofitable Corporate Social Responsibility
International Journal of Corporate Strategy and Social Responsibility, vol 1., no. 1, pp. 65 - 85, 2016
13 Pages Posted: 20 Jul 2020
Date Written: 2016
Many companies lose money by acting responsibly. So why do they do it?
Because in a favourable business climate, companies act generously.
Decades of empirical tests have yet to confirm that corporate social responsibility is and has been a financially responsible business strategy. This paper addresses why firms may choose to adopt a CSR strategy notwithstanding its bottom line effect. It is argued that a purely rational, enlightened self-interest understanding of the CSR movement is incomplete, and rather, that the insights of prospect theory allow for a fuller account of socially responsible behaviour. Analysing the business and political climate in which CSR has emerged, the paper concludes that a boundedly-rational approach to risk is inclining businesses to adopt CSR. The paper challenges business leaders and scholars to re-examine their assumptions of how risk is incorporated into CSR strategies, as well as suggesting a new path out of the social-financial performance controversy.
Keywords: corporate social responsibility, CSR, corporate social performance, CSP, prospect theory, history, risk, business strategy, bounded rationality, political economy
JEL Classification: N92, N62, N42, N32, N12, N22, N00, M14
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