NATIONAL UNIVERSITY OF COMPUTER & EMERGING SCIENCES

Is CSR smart as well as

good?
Introduction, Conceptual Framework, Literature
Review

Aisha Shaukat
Miriam Mehdi
Sadaf Iqbal
Sehrish Riaz
Zamara Amjad

The document contains Introduction to the Research topic, Conceptual Framework outlining the
related variables and the Literature Review on secondary research.
Introduction
Corporate Social Responsibility (CSR) also termed as responsible citizenship is a form of self-
regulation. Under such a system organizations take responsibility for the impact that they have
on the society and in some cases they try to benefit the society.

CSR is controversial and much discussed topic in the business and academic world. The major
criticism that it faces from the community perspective is that it is merely an advertising
technique, whereas internal stakeholders look at it as a cost. However many management gurus
look at it as a source of competitive advantage. The difference lies in how we define CSR, and
what sort of benefits do we expect from it.

Therefore to research weather CSR is good as well as smart, we need to have a clear stance on
what we mean by good and smart, so as to compare the expected and actual benefits. For the
purpose of our research we define ‘good’ in terms of the ‘positive impacts that CSR has on the
society and its development’. We interpret ‘smart’ as a phenomenon relevant to the organization
as in ‘benefits of engaging in CSR for the company’.

Through our research we will be trying to come up with a clear definition of CSR (activities etc).
Our research will try and assess how successful is CSR in fulfilling its responsibility to
positively benefit the society and the company. Another area of interest for our research will be
the extent to which consumer perception about a company is changed by its CSR practices.

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Conceptual Framework

Corporate Social
Responsibility

Benefit to the Benefit for the

society organization

Perceived good
Value towards
towards the Good will
the society
society

Return on
Return on equity
investment

The stock price

Total sales per

employee

Return on total
capital
employed

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Literature Review
The secondary research is done in order to clear the concepts regarding CSR and develop a clear
direction of the proposed research.

Often the responsibilities of an organization are mistaken to be its CSR; when corporate social
responsibilities is not only above the legal bindings but CSR activities are also expected to bring
a positive contribution towards the society. CSR often lacks the advancement in the right
direction in countries like Pakistan. Organizations have taken more interest in philanthropy as the
only way of doing CSR. Major reasons for such behavior have been due to lack of awareness and
concern for global issues; lack of concern for economic, environmental and social impact; and
the price-driven nature of the economy (Andrew Webster., 2008). On the same lines, researches
have been conducted to gauge the relationship between the economic and social value of the
firm. Elements like leadership, strategy, business focus, market demands are one of the primary
factors determining the course and nature of the CSR activities held by various organizations.
Another important phenomenon is the approach of different organizations towards CSR. The
non-profit and more customer oriented organizations have proactive approach towards CSR,
while the market oriented organizations have a reactive approach. But this trend has shifted in
the past too, with growing customer awareness and popularity-gaining critic reviews, and
organizations for their own growth in the long term (Manda Salls., 2005).

The roles of businesses and NGOs are important in implementing value added CSR. We don’t
see any substantial changes taking place in a society, even after large donations from
organizations because NGOs and businesses engage in a kind of a Faustian bargain believing that

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both sides have fulfilled their duties, though the reality is far different. Businesses should in fact
give up their traditional role of taking social responsibility as a cost or external threat to be
managed, rather work in collaboration with using their resources in planning, and implementing
solutions (Mark Kramer and John Kania., 2006).

With respect to the governance issues, research have been conducted to articulate the guidelines
for CSR although there is no hard and fast rule to it and as critics put it, it’s the intentions of the
organization behind the CSR that play a major role (Simon Zadek, HBR).

Businesses today are under a lot of pressure from activists, investors and stakeholder of a
business to manage social & environmental risks as well as market risks. The stakeholders
require them to produce outstanding performance in terms of competitiveness, market
performance, shareholder value and corporate growth, whereas social activists put them under
the pressure of delivering societal benefits. As no one fully trusts business, they keep an open
eye on them, through press, media, and make them fulfill their social responsibilities. (Jane
Nelson., 2005).

There has also been great concern regarding the quantification of the impacts of CSR as well
how it effects the decisions of the investors around the globe. It has been found that the socially
responsible firms receive more favorable ratings by analysts who act as intermediaries between
the firms and the capital markets. (Ioannis Ioannou and George Serafeim., 2010) Therefore,
the investors prefer to invest in companies, who in their perception, work for the benefit of the
society.

Amongst the most widely used rating technique for assessing an organization’s past and future
CSR performance, especially on the environmental front is the Kinder, Lydenberg, Domini
Research and Analytics (KLD). Although it is believed to be a good indicator on the matter,
organizations with higher KLD rating have shown greater non-compliance with the related
regulatory requirements (Chatterji et al., 2008). It is due to this that now; transparency of the
organizations as well as such rating authorities has become questionable for the investors as well
as the social activist groups. In this case then, the investors relying on these ratings to make their
investments are in fact allocating their resources inefficiently and in a misled manner. This
further raises questions regarding how to validate a company’s CSR investment information.

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Consequently, many studies that predict a positive correlation between CSR and financial
performance of an organization seem to have overstated the relationship between the two areas
of study (Elfenbein & Walsh 2007). For this reason, a rating metric must firstly be responsive to
the requirements and motives of the investors in using the numbers as an evaluation tool.

Yet, research suggests that even most of the companies engaged in CSR are not perceived
positively by the society as such. When tested along with other institutions, these companies
have been researched to have lower levels of trust placed in them by the people (World
Economic Forum, 2003). The primary contributor has been failed corporate governance ranging
from issues on disparity between CEO’s and average worker’s relative pay to the
commercialization of schools, aggressive and excessive advertising and the concerns relating to
increasing globalization. This is not to undermine the social value that corporations have created
concerning serious issues (Nelson, 2004).

Non-governmental Organizations have been playing their part by establishing more than 47
standards for corporate social accountability (Ranganathan, 1998). However, because they do
not possess any enforcement authority, they have only been successful up to the point of
introducing these standards in terms of the best practices guidelines and reporting initiatives
(Margolis &Walsh, 2001). Due to this any attempt to divert an organization’s interest from
investing in areas that also create value for itself, has been unfruitful. No matter what, the efforts
have been traditionally perceived to be, as Kofi Annan, United Nations Secretary explained, “a
happy convergence between what your shareholders want and what is best for millions of people
the world over” (Annan, 2001). For this reason, and because CSR already exists, it is important
to figure out ways of effective CSR implementation despite the ongoing debate over whether or
not such investment in justified (Margolis &Walsh, 2001).

It’s a general perception that there exist a trade-off between social responsibilities and
profitability of a business. In fact both CSR and Profitability are interrelated and direct
businesses towards success. This can only be achieved by making CSR part of company’s
strategy and operations, as it may help achieve long-term success. For this purpose business go
beyond industry practices, and embed CSR in company’s strategies such that finally it becomes a
competitive advantage for the company. (Michael E. Porter and Mark R. Kramer., 2006)

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References

Michael E. Porter and Mark R. Kramer, (December 2006). Strategy and Society; the link between
Competitive Advantage and Corporate Social Responsibility. Online, retrieved from Sales force
foundation: www.salesforcefoundation.org/files/HBR-CompetiveAdvAndCSR.pdf)

Jane Nelson, (2004). The Public Role of Private Enterprise. Online, retrieved from Harvard Business
Review: www.hks.harvard.edu/m-rcbg/CSRI/publications/workingpaper_1_nelson.pdf

Simon Zadek, (Decemeber 2006). The Path to Corporate Social Responsibility. Online, retrieved from
Harvard Business Review: www.salesforcefoundation.org/files/RedefiningCSR.pdf

Manda Salls, (August, 2005). How Organizations Create Social Value. Online, retrieved from Harvard
Business Review: hbswk.hbs.edu/item/4969.html

Andrew Webster, (May, 2008). Pakistan’s CSR Mentality Change. Online, retrieved from
www.tbl.com.pk/pakistans-csr-mentality-change/

Ioannis Ioannou and George Serafeim, August 2010. Impact of Corporate Social Responsibility on
Investment Recommendation. Online, retrieved from Harvard Business Review:
www.hbs.edu/research/pdf/11-017.pdf

Aaron K. Chatterki, David I. Levine and Michael W. Toffel, (Febraury 9, 2007). Do Corporate Social
Responsibility Ratings Predict Corporate Social Performance?. Online, retrieved from Harvard Business
Review: www.hbswk.hbs.edu/item/5542.html

Jooshua D. Margolis and James P. Walsh, (July 9, 2001). Does Misery Love Companies: How Social
Performance Pays off?. Online, retrieved from Harvard Business Review:
www.hbswk.hbs.edu/item/2369.html

Mark Kramer and John Kania, (February, 2006). Game Changing CSR. Online, retrieved from Harvard
Business Review: www.hks.harvard.edu/m-rcbg/CSRI/publications/workingpaper_18_krameretal.pdf

Jane Nelson, (May, 2005). Corporate Citizenship in a Global Context. Online, Retrieved from Harvard
Business Review: www.hks.harvard.edu/m-rcbg/CSRI/publications/Workingpaper_13_nelson.pdf

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