Corporate Social Responsibility: An Assessment of Motives and Implications

by
Aarushi Arora

A THESIS

submitted to

Oregon State University

Honors College

in partial fulfillment of
the requirements for the
degree of

Honors Baccalaureate of Science in Business Management

(Honors Scholar)

Presented November 23, 2020

Commencement June 2021
 AN ABSTRACT OF THE THESIS OF

Aarushi Arora for the degree of Honors Baccalaureate of Science in Business Management presented on
November 23, 2020. Title: Corporate Social Responsibility: An Assessment of Motives and Implications.

Abstract approved: ____________________________________________________

Inara Scott

Recent years have been marked with increasing rates of corporate scandals, environmental disasters, and

unfair labor practices, drawing attention to the importance of corporate social responsibility (CSR).

Despite increasing efforts in CSR, past research has shown increased levels of mistrust and skepticism

from consumers towards business. Furthermore, the very issues that CSR aims to solve are seen on the

rise.

This paper explores the motivation for companies to engage in corporate social responsibility (CSR) to

understand how CSR can be made better. Two approaches – the business case and the moral case – are

evaluated. This research finds that several limitations exist for the business case, making it inhibit CSR’s

impact and being more self-serving for the business rather than society serving. I find that a values-driven

approach to CSR can be used to fill the gap where the profits-driven approach falls short and improve

CSR efforts. This research follows a theoretical framework and further empirical research will be

beneficial in testing these ideas.

Key Words: Corporate social responsibility, strategic CSR, moral CSR, business case, moral case,
attribution theory, CSR skepticism, greenwashing, authenticity

Corresponding e-mail address: aarushi98@ymail.com

©Copyright by Aarushi Arora
November 23, 2020
Corporate Social Responsibility: An Assessment of Motives and Implications

by
Aarushi Arora

A THESIS

submitted to

Oregon State University

Honors College

in partial fulfillment of
the requirements for the
degree of

Honors Baccalaureate of Science in Business Management

(Honors Scholar)

Presented November 23, 2020

Commencement June 2021
Honors Baccalaureate of Science in Business Management project of Aarushi Arora presented on
November 23, 2020.

APPROVED:

_____________________________________________________________________
Inara Scott, Mentor, representing College of Business

_____________________________________________________________________
Ted Paterson, Committee Member, representing College of Business

_____________________________________________________________________
Betsy Rock, Committee Member, representing College of Business

_____________________________________________________________________
Toni Doolen, Dean, Oregon State University Honors College

I understand that my project will become part of the permanent collection of Oregon State University,
Honors College. My signature below authorizes release of my project to any reader upon request.

_____________________________________________________________________
Aarushi Arora, Author
 TABLE OF CONTENTS

Introduction…………………………………………………………………………………..01

What is Corporate Social Responsibility? …………………………………………………..04

CSR Motives…………………………………………………………………………………09

Extrinsic………………………………………………………………………………….10

Intrinsic…………………………………………………………………………………..12

Limitations of the Business Case…………………………………………………………….13

Filling the Gap: Intrinsic Motives and Organizational Values…….………………………...19

Conclusion…………………………………………………………………………………...24

References……………………………………………………………………………………28
 1

I. Introduction

Corporate social responsibility (CSR) has increasingly gained popularity in recent years

(Yuan, Yi Lu, Tian, & Yu, 2020; Porter & Kramer, 2006; De Jong, Huluba & Beldad, 2020),

partially due to increasing negative social and environmental impacts of corporations and

heightened consumer expectations (Yoon, Gürhan-Canli, & Schwarz, 2006; Moore, 2020). The

2017 Carbon Major Report found that “Over half of global industrial emissions since human

induced climate change was officially recognized can be traced to just 25 corporate and state

producing entities” (Griffin, 2017). With the rise of industrialization and globalization, we have

seen an exponential increase in issues such as pollution and unfair labor practices as a result of the

rise of the corporation and economic activity (Serafeim, 2013). Large corporations’ economic

activity certainly has benefits as it “creates goods and services for customers, wealth for

shareholders, and jobs for millions of people” (Serafeim, 2013, p. 6). However, corporations also

require an abundance of natural resources to operate, which leads to excessive pollution in local

and global environments, and also poor working conditions for many employees (Serafeim, 2013).

Due to this, consumers are expecting more from companies today and there is increasing

demand that organizations help address issues such as the environment, health care, and poverty

(Mayer, Ong, Sonenshein & Ashford, 2019). In fact, according to Cone Communications - a public

relations and marketing agency - a staggering 91% of the global population “wants to see

businesses do more than just make a profit” (Bergsma, 2019, para. 1).

Business leaders genuinely concerned about climate change, labor issues, and

environmental harm may turn to CSR to improve society and remedy some of the negative impacts

of business. As it has become a mainstream activity in business, many firms today incorporate

CSR spending as a major component of their budgets (Yuan et al., 2020). In fact, as of 2018,
 2

“Fortune Global 500 firms [spent] around $20 billion a year on CSR activities” (Meier & Cassar,

2018, para. 1).

While companies may engage in CSR to create sustainable change in society, they may

also engage in CSR to boost financial performance or improve their reputation. As new scandals

and crimes related to business fraud have emerged in the recent years, increased skepticism and

mistrust among consumers may encourage companies to emphasize their business ethics and CSR

initiatives in an effort to garner a more positive reputation (Vlachos, Tsamakos, Vrechopoulos &

Avramidis, 2008). Previous studies have also shown a positive relationship between corporate

social performance and corporate financial performance, adding to the interest of businesses in

adopting more CSR projects in order to improve their bottom line (Griffin & Mahon, 1997;

Kanwal, Khanam, Nasreen, & Hameed 2013; Byus, Ouyang, and Deis, 2010). Literature points to

this “commodification” of CSR, where CSR has been used as a tool to respond “strategically” to

primary stakeholder demands as compared to actually being intended to solve society’s biggest

problems (Walsh, 2005).

Importance of CSR Motivation:

These two reasons for engaging in CSR may be described as the business case for CSR

(profit-driven) and the moral case (values-driven). The motivation for the business case has been

described as extrinsic while the motivation for the moral case has been described as intrinsic.

Evidence suggests that these differing motivations matter to consumers (Parguel, Benoit-Moreau,

& Larceneuz, 2011; Skarmeas & Leonidou, 2013).

Firm motivation for CSR has been linked to consumer perception via attribution theory –

a motivational theory in Psychology explaining that individuals naturally try to attribute causes to

behavior (Weiner, 1972). Previous research has found that “an attribution of a specific behavior as
 3

intrinsically or extrinsically motivated influences attitudes towards the actor” (Parguel et al., 2011,

p. 11) - in this case, affecting the perception of consumers towards the business. When intrinsic

motives are attributed to moral behavior, the action is seen as sincerer, whereas extrinsic motives

come off as dishonest and misleading for the consumer. Actions like such are seen as opportunistic

and only initiated because of a reward (Parguel et al., 2011).

For these reasons, determining a firm’s motives for engaging in CSR also helps illustrate

differences between greenwashing and authentic CSR. Consumers are less likely to doubt CSR

efforts when they perceive them as genuine; and due to the increased trust towards authentic CSR,

they will be more likely to support organizations with sincere motives (Skarmeas & Leonidou,

2013). Furthermore, consumers have also expressed interest in justifying the “why” behind firms’

CSR practices (Parguel et al., 2011) and past research has shown that “consumers are important

agents in influencing firm policies” (Albuquerque, Koskinen, & Zhang, 2019, p. 4463).

But do these motivations actually impact the success of CSR activities? This thesis seeks

to answer this question. By analyzing the literature related to intrinsic and extrinsic CSR, this thesis

will determine how these differing motivations impact the success of CSR activities, and then

make recommendations for how to improve CSR efforts in corporations by addressing motivation.

The paper proceeds as follows: I first explore different definitions of corporate social

responsibility and present a brief history of the topic. I then explain the two main motives behind

CSR - extrinsic vs. intrinsic - and cite previous frameworks to explain the differences between the

two. Then, I show how the business case for CSR undermines CSR efforts. In the final section of

this paper I suggest how a values-driven approach to CSR can be used to better foster societal

change. While some companies have noteworthy achievements in sustainability or other social
 4

issues, I find the need for systemic change remains, and offer insight into why there exists a need

for a shift in how CSR is usually approached.

II. What is Corporate Social Responsibility?

As with any other big topic of controversy, there have been multiple definitions of the

concept of corporate social responsibility. While it can sometimes be a good thing to have multiple

ways to approach an idea, the same can also be a source of confusion and misinterpretation of the

term. Based on the context and origin of the definition, companies can interpret the term in a way

that best fits them. The question then remains - exactly what sorts of responsibilities fall under this

huge umbrella of corporate social responsibility? Do firms even have obligations to society that

go beyond profit and compliance to law, or are their responsibilities solely economic in nature?

The concept of corporate social responsibility first gained popularity in 1953, when

Howard R. Bowen wrote his landmark book Social Responsibilities of the Businessman (Carroll,

1999). One of the key questions Bowen presents in his book is: “What responsibilities to society

may businessmen reasonably be expected to assume?” (Bowen, 1953, p. xi). As noted earlier, this

question remains important in the CSR debate today – do these responsibilities extend beyond

making profits?

Bowen argued the responsibility of business to society could be described as businessmen’s

obligations to act according to what is “desirable in terms of the objectives and values of our

society” (Bowen, 1953, p. 6). Although somewhat vague, by highlighting the objectives and values

of society, Bowen’s focus for social responsibility goes beyond the goal of business to make profit.

In his book, Bowen also cited a 1946 Fortune magazine poll, describing the “social consciousness”

of managers: that they “were responsible for the consequences of their actions in a sphere

somewhat wider than that covered by their profit-and-loss statements” (Fortune, March, 1946, pp.
 5

197-198 as cited in Bowen, 1953). In this way, Bowen highlighted firms’ moral obligation to

society as an important component of CSR.

Another well-cited contributor to CSR literature is Keith Davis. In 1960, Davis coined the

following as his way of defining the topic: “businessmen’s decisions and actions taken for reasons

at least partially beyond the firm’s direct economic or technical interest” (Davis, 1960, p. 70).

Additionally, Keith elaborated that these social responsibilities were to be proportionate with a

firm’s social power - a concept referred to as the Iron Law of Responsibility (Davis, 1967). This

idea was further reinforced in 1971 by George Steiner: “The larger a company becomes, the greater

are [its responsibilities to help society achieve its basic goals]” (Carroll, 1999). It is also important

to note here that in most instances, social power also directly aligns with firm size and shareholder

value (Serafeim, 2013); therefore, making it perhaps easier for larger corporations to engage in

CSR, given their access to both financial and non-financial resources. Not only are larger

companies able to “affect the political process through lobbying” (Serafeim, 2013), they usually

also tend to have higher profit margins and return on equity (Healy et al., 2013) – highlighting

their power and wealth.

A more detailed way to define the concept is offered by Joseph W. McGuire, who includes

the explicit clause that responsibilities “extend beyond [economic and legal obligations]”

(McGuire, 1953). To further clarify this idea, his explanation went on to include “sub-topics” such

as political interest, community welfare, education, and employee happiness (Carroll, 1999). By

including all these facets, McGuire argued that a business must consider these things in addition

to their economic gain.

The idea of social responsibility translating into an ideology that prioritizes more than just

profit has been common in many definitions since then. Another example is prevalent in the book,
 6

Business in Contemporary Society: Framework and Issues. The author, Harold Johnson, argues

that “instead of striving only for profits for its stockholders, a responsible enterprise also takes into

account employees, suppliers, dealers, local communities, and the nation” (Johnson, 1971, p. 50).

In terms of these specific interest groups, Johnson’s approach is quite similar to McGuire’s as

noted earlier. This idea is also backed by what we know today as the stakeholder theory in business

(further discussed later in this section).

Davis, cited earlier, expanded on his definition in 1973; adding the component that “social

responsibility begins where the law ends” (Davis, 1973). According to this view, corporations must

not only comply with the law (that is a given), they must engage in behavior that goes beyond this

basic societal expectation. In other words, policies such as minimum wage, emissions cap, and

other fair practices are required by law; but the corporation that goes beyond these standards is

using its platform to engage in social responsibility. This distinction is one of the key aspects in

how I use CSR for the purpose of this paper.

Today, “Carroll’s Pyramid of CSR” has become a common framework to explain CSR:

Figure 1: Carroll’s Pyramid of CSR (Carroll, 2016)

 7

Archie B. Carroll presented this model to showcase four different elements of CSR:

economic, legal, ethical, and discretionary responsibilities (Carroll, 1999). According to his

framework, the economic and legal responsibilities are “required” of businesses, the ethical is

“expected” and philanthropic is “expected/desired” by society. As the name suggests, the

economic dimension focuses on the profit aspect of the business; legal ensures that firms obey the

law; the ethical aspect explains the behaviors society expects from the firm; and the discretionary

responsibilities are voluntary, based solely on manager judgement.

It is important to note that these requirements are not listed in sequential order but rather

increase in importance and consequence to the firm. Carroll views economic responsibility as a

“baseline” when looking at the overall picture. He argues that if a firm is unsuccessful in this initial

economic component, it might be forced to go out of business and therefore, other social

responsibilities simply cannot exist. Legal responsibilities are those that businesses are “expected

and required to comply with” (Carroll, 2016, p. 3). Carroll refers to the regulations aspect as the

“codified ethics of society” and argues that this is only a “partial fulfillment of the social contract

between business and society” (Carroll, 1991, p. 41).

The third part of the framework, ethical responsibilities, addresses the manner in which

firms execute their business responsibilities. Carroll summarized this concept by stating that,

“businesses will be responsive to the “spirit” of the law, not just the letter of the law.” Further, an

important distinction here is that even when laws are absent, it is expected that a business will act

fairly and objectively such that the need arises.

Lastly, “corporate philanthropy includes all forms of business giving.” (Carroll, 2016, p.

4). Some forms of these responsibilities may include employee volunteerism, monetary gifts, and

product and service donations. Because this an “expected” and not “required” responsibility, such
 8

practices are often up to company discretion. However, it is also important to note that this element

has perhaps been the most popular among CSR definitions in the past; possibly due to its

discretionary nature.

The definitions presented above all assume that a business should also have a role in society

that is more than just economic – a moral foundation to CSR. However, opponents of this view

argue that the sole responsibility of a corporation is to make profit - therefore establishing an

economic foundation for CSR.

Economist Milton Friedman is perhaps the most cited in the argument that “social issues

are not the concern of businesspeople” and “that these problems should be resolved by the

unfettered workings of the free market system” (Carroll, 2016, p.1). Under the Friedman doctrine,

the only social responsibility of a business is to increase profits, and social problems should be left

for the government and legislation. Friedman argues that in a free society, “there is one and only

one social responsibility of business – to use its resources and engage in activities designed to

increase its profits so long as it stays within the rules of the game” (Friedman, 1970, p. 6). By

adopting this language, and excluding the impact corporations have on society, Friedman’s school

of thought focuses only on the firm’s economic obligations.

Opponents of the moral view also argue that since the primary focus of businesses is

economic, their skills and qualifications will naturally fall short when it comes to social matters.

As a result, perhaps government or other institutions are better equipped to tackle these social

matters (Davis, 1973). Additionally, getting involved in social goals “might dilute business’s

emphasis on economic productivity” (Davis, 1973, p. 319). In other words, focusing on such issues

that are not a core part of a company’s business model will divert management’s attention and

bring additional, unnecessary costs (Serafeim, 2013).

 9

Perhaps due to the expansion of the corporation as well as increase in their impact, several

other business ethics related topics such as stakeholder theory, shareholder primacy, and corporate

citizenship have become prevalent since the 1990s. A discussion of the differences between

stakeholder theory and shareholder primacy helps to further clarify the two interpretations of the

corporate social responsibility of business described above.

Stakeholder theory details the “interconnectedness” between business and other

stakeholders such as customers, suppliers, and employees - a concept that first gained popularity

in 1984 in R. Edward Freeman’s book, Strategic Management: A Stakeholder Approach. In

contrast to Friedman’s belief, Freeman argues that while profitability is a goal of corporations, the

corporation must also balance stakeholder interests simultaneously (Freeman, 1984). Freeman’s

view captures that there are several relationships to be considered and valued when thinking of a

successful business. Considering that these stakeholders consist of more than just shareholders,

they likely fall under the same category as proponents of CSR as a moral obligation to society.

Shareholder primacy, on the other hand, argues that corporations must maximize value for

shareholders before looking at the interests of other stakeholders - in other words, highlighting the

importance of profit maximization for a corporation (Ronnegard & Smith, 2018). Considering this,

shareholder primacy can be a “major obstacle to corporate social responsibility because it is said

to hinder managers from considering the interests of other corporate stakeholders besides

shareholders” (Ronnegard & Smith, 2018, p. 1). Following this logic, opponents of the “CSR as a

moral obligation” view might resonate closely with the shareholder primacy school of thought.

III. CSR Motives

In this part, I evaluate the two main types of motivation for CSR: intrinsic and extrinsic.

Extrinsic motivation entails the strategic-driven motives for CSR, also referred to as the “business
 10

case.” Values-driven motives encompass intrinsic motivation, referred to as the “moral case” for

CSR. Considering CSR motivation has proven important in assessing consumer perception (Story

& Neves, 2015), and because it can give insight for policy makers and regulators to stimulate better

CSR (Graafland & Mazereeuw-van der Duijn Schouten, 2012), the importance of the topic cannot

be overstated. If extrinsic CSR works better, it may point to the need to create more regulation and

incentives to encourage such behavior. On the other hand, if intrinsic CSR works better, it will be

important to be careful in creating additional regulation as these external rewards may overshadow

the intrinsic drive.

A. Extrinsic Motivation: The Business Case for CSR

A strategic approach to CSR aligns most with the business case argument: How will

engaging in a CSR practice increase profitability? In other words, this approach is mainly

concerned with tangible benefits to the business. Some examples of this are profit maximization,

increasing market share and shareholder value, and/or positive marketing. A business case for CSR

highlights external rewards as the main driver for participating in socially responsible behavior.

Kurucz, Colbert and Wheeler (2008) proposed four main arguments for the business case

perspective of CSR. A brief summary of each is presented below:

1. Cost and risk reduction: this argument is grounded in the belief that a firm may engage

in CSR if the benefits equate cost and risk reduction for the firm. One example of this idea

is a firm gaining tax advantages through certain CSR efforts (Carroll & Shabana, 2010). It

is also easy to see how this approach may be widely accepted from a management

standpoint in hopes of improving overall bottom line, while simultaneously contributing to

societal improvement.
 11

2. Gaining competitive advantage: this view contends CSR as part of company strategy in

the sense that a firm that has established CSR practices will be perceived as better among

its competitors in the market. This is justified by the fact that by “strategically orienting

and directing resources toward the perceived demands of stakeholders”, firms can position

themselves better. In essence, “stakeholder demands are viewed less as constraints on the

organization, and more as opportunities to be leveraged for the benefit of the firm” (Kurucz

et al., 2008, p. 89).

3. Effects on company reputation and legitimacy: Participating in CSR may have a positive

impact on company reputation and legitimacy. In essence, improved reputation through

CSR can act as a marketing strategy in terms of differentiation and in turn, lead to better

financial performance compared to industry rivals. Carroll and Shabana (2010) argue that

corporate philanthropy, one of the most common CSR activities today, “aims to enhance

corporate legitimacy and reputation” (Carroll & Shabana, 2010, p. 99). Another tactic that

may be included in this argument in increased transparency for the firm. Not only do

practices like corporate social reporting provide insider information about the company,

but through this method “firms are able to illustrate that their operations are consistent with

social norms and expectations, therefore they are legitimate” (Carroll & Shabana, 2010,

p.100). Consequently, by increasing legitimacy and bettering their reputation, the firm is

also gaining competitive advantage in the process.

4. Creating win-win situations for the company and society (synergistic value creation):

the main goal of this motive is to build on opportunities that “reconcile differing

stakeholder demands” and in effect, “[create] pluralistic definitions of value for multiple

stakeholders simultaneously” (Kurucz et al., 2008, p. 91). The idea of moving towards a
 12

triple bottom line (people, profit, planet) falls under this argument as it “emphasizes

synergies that can emerge for organizations, environment, and societies through integrated

efforts” (Kurucz et al., 2008, p. 91). The economic focus is emphasized by the notion that

if firms turn social problems into economic opportunities, it will not only lead to economic

benefit, but also increase productive capacity, increased human competence, increase the

number of jobs and eventually result in more wealth. In this way, the idea of the firm

pursuing business as usual while satisfying multiple stakeholder demands is justified.

Indirectly, the goal of all these arguments is to increase the bottom line (sometimes

directly). Similarly, it can also be said that once the above are achieved, it might create a better

workforce and work climate, which may lead to more commitment and lower absenteeism. In turn,

this will not only increase productivity, but also profitability (Graafland & Mazereeuw-van der

Duijn Schouten, 2012).

B. Intrinsic Motivation: The Moral Case for CSR

A moral approach to CSR goes beyond the bottom line, focusing on non-financial motives.

In this school of thought, CSR is based on intrinsic motivation - pursuing social responsibility

simply because it’s the right thing to do. This view implies that behaving in socially responsible

ways is a moral duty of business towards society. This view may be considered the deontological

perspective towards CSR because it argues that it must be pursued even in the absence of laws and

regulation (Graafland & Mazereeuw-van der Duijn Schouten, 2012). Therefore, this approach is

also sometimes referred to as “values-driven” (Story & Neves, 2015). Looser and Wehrmeyer

(2016) highlight another key component of this discussion: intrinsic CSR “defines what the

organization’s social values are, or what it “stand for” (p. 550).

 13

Graafland & Mazereeuw-van der Duijn Schouten (2012) further break down intrinsic

motives into two categories: moral duty and altruism. The authors argue that under the moral duty

approach, companies feel obligated to do something because it is right. Because this is often

derived from religious principles and individuals’ personal beliefs about morality (Graafland &

Mazereeuq-van der Duijn Schouten, 2012), a deeper discussion about morality and religious values

can be ensued when talking about moral duty; but that is beyond the scope of this paper. Altruism

is described as the other intrinsic motive. As the word implies, in this case, upper management

decides to partake CSR simply because they want to contribute to the common good of society

and perhaps derive enjoyment and satisfaction through this.

In terms of perception, it can be said that the business case deals mainly with how a

company can avoid a negative impact on society, whereas the moral case considers how to improve

society for the common good. In this way, reactive CSR can be said to be strategically-driven and

proactive CSR can be identified as values-driven.

IV. Limitations of the Business Case

A business case for CSR seems like the perfect win-win situation: dealing with societal

problems and increasing the bottom line simultaneously is simply too good for most companies to

pass up. The underlying assumption becomes that by doing good, firms can also do well for

themselves. Moreover, as cited earlier, previous research has shown a positive relationship

between a firm’s social initiatives and financial performance (Griffin & Mahon, 1997; Kanwal et

al., 2013). However, an analysis of the literature related to motivation reveals that while the

business case presents many incentives for businesses to engage in this practice, it has significant

limitations and flaws. In this section, I describe those limitations, which include: favoritism in

types of CSR projects undertaken, increased greenwashing, lack of consumer authenticity in

 14

company CSR efforts, falling short on solving complex issues, and undermining intrinsic

motivation for CSR. Perhaps these are some of the reasons why despite an increased focus on CSR

today, we have yet to see the same amount of impact (Barnett, 2007). In other words, although

abundant literature exists linking CSR and financial performance, “the gap between the interests

of business and society may be widening, not shrinking” (Barnett, 2007, p. 168).

A. The Business Case Limits the Types of Projects that Firms Will Undertake

Supporters of the business case approach to CSR argue that “it pays to be good,” but a key

drawback of this doctrine is that firms will naturally choose to undertake the more profitable

projects (Nijhof and Jeurissen, 2010). Regardless of the power that big businesses hold, even the

largest and most powerful are limited by resources - resources that are most often provided by

external shareholders. Grounded in resource dependency theory, these shareholders hold some

power over the company and this inevitably leads to bias among which social issues are prioritized.

Not only does this create “favoritism”, but this “sorting process” likely pushes the issues that need

the most attention to the bottom of most company agendas. Nijhof and Jeurissen (2010) refer to

this phenomenon as opportunism while Barnett (2007) refers to it as critical stakeholder

responsiveness. In fact, Barnett (2007) even argues that today, many firms have confused “CSR

with critical stakeholder responsiveness”, which means that powerful stakeholders [benefit] over

social problems from corporate interest in social responsibility (p.170). Under this “stakeholder”

model, power, legitimacy, and urgency are the most common factors used to assess which issues

to focus on (Barnett, 2007). It is easy to see how very little (if at all) change will come out of this

approach due to this problem of prioritization of profitable projects.

 15

B. The Business Case Encourages Greenwashing

The problem of opportunism easily lends itself into a second drawback of the business

case: increased greenwashing and skepticism by consumers as to the authenticity of firm actions.

Greenwashing is when there is a discrepancy between a firm’s claims for CSR and actual

performance (De Jong et al., 2020). It is also described as “window dressing” in the sense that it

can be used to show an appearance of efforts, while continuing business as usual. Mazutis &

Slawinski (2015) define greenwashing as “a tool for covering up firms’ societal harms” - hinting

at the deceptive nature of such practices. Examples of this can be observed in firms’ actions to

“improve their distorted image” following “environmental disaster such as the Bhopal gas tragedy

(1984), Chernyobl nuclear power plant disaster (1986), and the Exxon oil spill (1989)” (Aggarwal

& Kadyan, 2011, p. 61).

Greenwashing can result easily from the business case (based on external rewards) as firms

might be inclined to find “short cuts” to reap the benefits of CSR, such as improved reputation,

without actually behaving accordingly (De Jong et al., 2020). This idea is further reinforced by

past research on motivation. In his book, Drive: The Surprising Truth About What Motivates Us,

Daniel Pink (2009) argues that “the problem with making an extrinsic reward the only destination

that matters is that some people will choose the quickest route there, even if it means taking the

low road. Indeed, most of the scandals and misbehavior that seemed endemic to modern life

involve shortcuts” (Chapter 2). In other words, when companies choose to focus on the business

case for engaging in CSR, they may be more prone to doing whatever it takes to look good in

consumers’ eyes - without actually using CSR to create an impact in society, undermining the real

reason for engaging in CSR. Critics have also suggested that things such as sustainability reports
 16

and other means to report CSR activities (i.e. external rewards) “may serve as veils hiding

activities” (Looser & Wehrmeyer, 2016).

C. The Business Case Undermines Consumer Perceptions of Authenticity

Consumers are more likely to perceive CSR as inauthentic under the business case

approach, especially as a result of greenwashing; fostering CSR skepticism and mistrust in the

corporation (Skarmeas & Leonidou, 2013). Barnett (2007) argues that “the more a firm’s initiative

to help society also directly benefits the firm (hence, a business case approach), the less likely will

that initiative improve the firm’s relationships with its primary stakeholders” (i.e. consumers) (p.

177).

Mazutis & Slawinski (2015) argue that there are two main aspects of authenticity that show

CSR efforts are genuine in stakeholders’ eyes: distinctiveness and social connectedness.

Distinctiveness is defined as “the extent to which a firm’s CSR activities are aligned with their

core mission, vision and values” (p.142); whereas social connectedness “refers to the degree to

which an organization’s CSR efforts are embedded in a larger social context” (p. 143). These

definitions draw primarily from the idea that authenticity usually equates to “being true to

yourself” and that this be done within a social context. In this way, Mazutis & Slawinski (2015)

apply the same concept to a business - simply adopting a generic practice that may be referred to

as CSR does not capture the true value of the construct. The business case for CSR leads to the

false perception that “it does not matter what you do, as long as you do some good” (Nijhof &

Jeurissen, 2010, p. 623). It is easy for firms to fall prey to this thinking and try to locate the next

best “green” strategy to capitalize on, when a company’s focus is to increase shareholder value

through CSR. However, the truth is, it does matter what you do and how a firm goes about their
 17

handling of these social issues will dictate how consumers perceive these efforts, contributing to

the authenticity aspect.

Consumer perception of authenticity further matters because consumers are less likely to

support businesses and causes if they see them as inauthentic, resulting in loss of brand equity and

loyalty (Skarmeas & Leonidou, 2013, De Jong et al., 2020; Alhouti, Johnson & Holloway, 2016).

If a company only chooses to engage in CSR when there is an economic benefit for them,

consumers may question the authenticity and the legitimacy of the impact of CSR activities to

society (Barnett, 2007). After all, it raises the question – are firms giving or taking by engaging in

CSR? Such an approach to CSR furthers the growing gap between business and society, and adds

to the concern of “how firms can better meet the needs of society” (Mazutis & Slawinski, 2015, p.

139). This is another key reason why the business case often falls short of delivering its goals to

the welfare of society at large (Barnett, 2007).

D. The Business Case Is Less Effective at Addressing Complex Issues

Using a carrot and stick reward system may work for simple, straightforward, repetitive

tasks; but a deeper level of motivation is required for more complex tasks (Pink, 2009). The

practice of implementing effective CSR, with the goal to tackle some of society’s biggest issues,

is undeniably a complex task; and therefore, requires cognitive and creative thinking beyond

everyday work (Nijhof & Jeurissen, 2010). A simple, cookie cutter approach will not only act as

window dressing, it will simply be ineffective. In this way, employees and managers who

genuinely care about social issues from a moral perspective will be invaluable to a firm’s

contribution towards society. Therefore, I argue that basic extrinsic rewards simply are not enough

to generate new ideas or create lasting, sustainable changes for the environment or otherwise. As
 18

mentioned earlier, these extrinsic rewards may actually do the opposite and encourage shortcuts

rather than actual solutions, leading to further problems (Pink, 2009).

E. The Business Case May Undermine Intrinsic Motivation

Considering the importance of this intrinsic drive in fostering change, perhaps the biggest

drawback to the business case approach to CSR is that it may actually drive out the intrinsic drive.

There are two reasons for this: the over justification effect and an economic schema mindset

(Nijhof and Jeurissen, 2010; Mayer et al., 2019).

The over justification effect in psychology argues that an extrinsic reward can decrease a

person’s intrinsic motivation to do something. In simple terms, if people are rewarded for

something they already enjoy doing, they tend to focus more on the rewards rather than the value

they may derive from the activity (Deci and Ryan, 2000). It is easy to see examples of this in our

daily lives as well. This theory can be applied to the business case for CSR because when firms

focus more on the increasing profit thinking, perhaps those employees who are sincere advocates

for such causes (the invaluable resource mentioned earlier), will lose interest (Nijhof and Jeurissen,

2010). For a company who may already have such a group of driven individuals, presenting the

business case may actually result in a huge missed opportunity to take a step towards real change.

It is a common phenomenon in the business world that an increased focus on profits and

pursuing a financial lens can activate an economic schema among individuals, meaning that they

will focus more on self-interest with increased greed (Mayer et al., 2019). Under this business case

mindset, not only will firms be focused on simply increasing profits, but economic schemas have

also shown to reduce compassion and helpfulness of individuals (Molinsky, Grant and Margolis,

2012). Following this logic, it is easy to see how prosocial behavior, or proactive CSR, may get

overlooked when a business case argument is utilized. In this way, a profit driven motive may
 19

actually defeat the underlying purpose of CSR - providing positive value to society by addressing

some of our biggest issues.

In this way, I argue that by focusing on the business case for CSR, firms may be more

inclined to participate in these efforts more; but the impact of this may be negligible and in more

cases than not, only amount to greenwashing. Gond, Palazzo, and Basu (2009) further reinstate

that the risk of this approach “lies in an emphasis on the means of achieving CSR reputation rather

than the end of social welfare” (p. 76).

Certainly, if an opportunity to make profit through a CSR effort arises, firms will be

inclined to capitalize on it. Many might also argue that perhaps such participation in CSR is better

than nothing at all. However, summarizing the points noted above, this will be short lived and the

lack of integration into the company will only lead to decrease in consumer trust (Mazutis &

Slawinski, 2015). Additionally, a greater point to consider is that a strict reliance on the business

case simply overshadows the moral commitment of business and its employees to society (Nijhof

& Jeurissen, 2010; Mayer et al., 2019). Furthermore, the deeper implication here is that in order to

fully gain value from all that CSR can achieve, corporations must look beyond the business case.

Business models and shareholders are certainly important, but they are not enough to address the

growing number of complex issues in our society – the very goal of implementing a CSR initiative.

V. Filling the Gap: Intrinsic Motives and Organizational Values

Values driven CSR can be used to fill the gap where the business case falls short. As noted

in an earlier section, under this approach, companies will naturally want to participate in CSR

simply “because they believe it’s the right thing to do” (Story & Neves, 2015, p. 112). Intrinsic

motives, morale, and values rather than a formalized business case are the frontrunners in this

ideology (Looser & Wehrmeyer, 2016). Furthermore, Berger, Cunningham, and Drumwright,
 20

2007, state that under the social values-led model for CSR, organizations adopt CSR initiatives

regarding specific issues for non-economic reasons and define their CSR “around a particular

social issue” (p.141).

I argue that when a firm’s CSR efforts are driven by intrinsic motives and company values,

they have a better chance at creating meaningful impact due to three main reasons, as modeled

below:

1. Better in-role performance and job satisfaction among employees will result in new

opportunities to drive societal change.

Previous research on human behavior has emphasized the importance of intrinsic motives

over extrinsic motives in the workplace and otherwise (Pink, 2009). The same model can be

applied to executing lasting and effective CSR. After all, human capital is one of the main

resources in every business operation (Leddy, 2018).

Previous literature has drawn a positive relationship between intrinsic CSR attributions and

job satisfaction and task performance (Story & Neves, 2015). I further argue that with increased
 21

job satisfaction, employees will be more engaged and more likely to come up with new

opportunities that can result in more meaningful CSR. This idea can be supported using the self-

determination theory (Deci & Ryan, 2000) - if employees are intrinsically motivated towards CSR,

they will be more driven to find new solutions. Citing the over justification effect as stated earlier,

when extrinsic rewards are replaced with intrinsic drive, employees feel they are contributing to

society beyond themselves (Nijhof & Jeurissen, 2010). Moreover, “employees are increasingly

viewing their workplaces as important venues to advocate for social issues they deem significant

in their personal lives” (Mayer et al., 2019, p. 1058). Having this internal drive among employees

is instrumental and firms must use this to their advantage to foster social change.

2. By aligning efforts with core company values, CSR will also become embedded in the

organizational culture, establishing a lasting foundation

The importance of organizational values cannot be overstated for facilitating the type of

intrinsic drive explained above. Additionally, in this way, firms will also achieve the social

distinctiveness aspect of authenticity, as noted by Mazutis & Slawinski (2015) presented in an

earlier section above. Looser & Wehrmeyer (2016) define intrinsic CSR as “core values within the

organization, which cover what the organization is about, what its social values are, what it stands

for” (p. 550). By acting in accordance to company values, and choosing to focus on issues that

directly relate to the firm (i.e. an oil company targeting environmental issues and workers safety

issues as compared to human rights issues), not only can CSR feel more natural, but it will also

become deeply embedded in the organizational culture - establishing a lasting foundation.

Additionally, Mayer et al. (2019) have also found that when it comes to convincing upper

management on social initiatives, using moral language is a more effective tool than business logic.

This is especially true in cases where language also aligns with company values and/or mission
 22

(Mayer et al., 2019) – highlighting the importance of values-driven CSR. Not only will this

increase prosocial motivation among managers (i.e. “desire to expend effort based on a concern

for helping others” (Mayer et al., 2019, p. 1061)), but the high fit with organization’s values will

be instrumental in sustaining CSR efforts as organizations are more likely to stay committed to

these initiatives (Mazutis & Slawinski, 2015).

3. Values-driven CSR has related negatively to CSR skepticism. Consumer perception of

authenticity increases when consumers attribute intrinsic motives towards a firm’s CSR

undertaking.

Yoon et al. (2006) found that CSR initiatives can backfire on an organization’s reputation

when consumers are skeptical about the genuine motives of the organization. This is mainly due

to the fact that firms are focused on gaining financial returns; and welfare of broader society

(beyond primary stakeholders) doesn’t coincide with this, and may even conflict. “When

consumers become suspicious and infer that the company’s true motive for the CSR activity is

only to improve its image, CSR activities are not only inefficient but may actually backfire, leaving

the company with a more negative image than would be the case without the CSR activity” (Yoon

et al., 2006, p. 377). Not only does this aspect highlight the importance of sincerity in CSR, but

perhaps also the impact that proactive behavior can have on consumer perception. If a company

has been participating in prosocial behavior related to social responsibility, it is understandable

that the chances of that company trying to “improve its image” will decrease significantly.

Researchers have cited attribution theory to argue that “sympathy toward a practice is

contingent upon the attribution consumers make about their organizational motives” (Story &

Neves, 2015, p. 112). Similarly, Skarmeas & Leonidou (2013) tested several hypotheses and

whether each related positively or negatively to CSR skepticism. Their findings revealed that,
 23

“egoistic and stakeholder-driven attributions (i.e. extrinsic motives) contribute to the development

of consumer skepticism toward CSR, while values-driven motives (i.e. intrinsic motives) inhibit

its formation” (p.1836). Perhaps this is one reason why despite increased focus on CSR, mistrust

and skepticism towards business has also increased (Mazutis & Slawinski, 2015).

With increase in trust due to perceptions of authenticity, consumers are more likely to

support organizations that engage in intrinsically driven CSR. Consequently, Yoon et al. (2006)

found that consumers’ evaluations of a company only improved when sincere motives were

attributed to CSR. Further, another key finding from Yoon et al. (2006) is that “CSR activities are

futile, or even counterproductive, unless consumers perceive the activity as driven by a sincere

interest in the supported cause” (p. 383). In this way, not only is values-driven CSR is proven way

to retain customers in the long term but I argue that with increased support from consumers, these

firms will be even more motivated to continue their efforts in CSR.

Patagonia and Ben and Jerry’s are two examples of companies that have followed this

values-led model for years.

Ben & Jerry’s statement of mission is divided into product mission, economic mission, and

social mission (“Ben & Jerry’s is a values-led company”, n.d.). From the very start, the founders

of the company have actively participated in social causes: several CSR projects aligning with the

company values and mission also go back to 1988. Examples include the “1% for Peace” in 1988,

“Take a Stand for Children” in 1992, “Drilling is not the Answer” in 2005 and “GMO? Thanks,

but No” in 2013 (“Causes Ben & Jerry’s has advocated for”, n.d.). Along with this, the company

also created the Ben & Jerry’s Foundation in 1985 to “support grassroots movements that drive

societal change” (Gavin, 2019).

 24

Two facets of Patagonia’s company mission are “cause no unnecessary harm” and “use

business to protect nature” (“Patagonia: Our Core Values”, n.d.). Furthermore, a brief look at the

company’s website showcases their commitment to the environment and the planet and therefore,

these two principles. Since 1985, Patagonia has also committed to giving 1% of sales to the

preservation and restoration of the natural environment and actively funded grassroots activism

(Mulqueen, 2019; Byars, 2018). In 2018, Patagonia gave away $10 million from a federal tax cut

“to fight for environmental causes threatened by the tax cut itself” (Mulqueen, 2019, para. 16;

Byars, 2018). Patagonia’s efforts are deeply embedded in the company’s mission and values and

more importantly, the company has been proactive about its commitment to CSR. Commitment to

the company’s espoused values, and consistency in the company’s efforts are arguably two of the

main reasons for their success.

VI. Conclusion

Previous research has shown the benefits of CSR for the firm’s financial performance and

increasing shareholder value (Griffin & Mahon, 1997; Kanwal et al., 2013). These incentives

suggest that more and more firms will engage in CSR. However, I argue that simply engaging in

CSR is not enough. To have meaningful impact and to resolve critical societal issues, the moral

and ethical dimension of CSR must be evaluated.

The limitations of the business case approach (driven by extrinsic motives) act to inhibit

CSR impact on society as it tends to become more self-serving for corporations than society

serving - therefore, making the idea counterproductive in nature. Furthermore, extrinsically driven

CSR (business case) usually tends to be reactive (Story & Neves, 2015); and is therefore more

closely related to greenwashing. Intrinsically driven CSR is usually proactive and tends to be

perceived as more authentic and sincere (Story & Neves, 2015; Mazutis & Slawinski, 2015). Not
 25

only are consumers more likely to trust these sincere motives (Vlachos et al., 2008); but they will

also achieve long term impact more successfully, whereas the former will only amount to short

term solutions, that will be “cover ups” following a major scandal or disaster. Abundant literature

also exists that shows consumers are willing to support companies they truly believe to be socially

responsible by paying more for their products and staying actively engaged in the company's

efforts (Yoon et al., 2006, Sustainable Selections, 2015).

Another implication of these findings is that since the extrinsic motives for CSR come with

several limitations and drawbacks, perhaps we need to re-assess the increase in CSR regulation as

this may end up being counterproductive. Until a shift in “business as usual” thinking is made,

companies will lose focus of sincere CSR and all that it can achieve for society (Nijhof & Jeurissen,

2010). A combination of intrinsically motivated employees and alignment of CSR efforts with

company values provides opportunities for businesses to take a step towards real change.

If the end goal of business is to capture value through increased profits or improved

reputation, arguably, the business is not pursuing CSR for the right reasons - that is, acting on its

moral commitment to society. Indeed, many companies are still advocates of the business case,

and many may even feel they don’t have a moral obligation to society. Berger et al. (2007)

conducted interviews with top executives to understand some of their perspectives on CSR. One

advocate of the business case said the following:

“There is nothing altruistic about CSR initiatives. If we have two projects, one with a 20%

ROI and a second with a 10%, even if the second is socially more responsible, [this company] will

do the 20% ROI project” (p.139).

For these companies, perhaps the employees need to play a larger role in convincing upper

management by acting on their individual want to advocate for social issues in the workplace
 26

(Mayer et al., 2019). Bansal (2003) also indicates the importance of individual concerns in selling

issues to management for organizational response. Additionally, if profit is still the sole motivator

for such firms, they may look to follow the examples of Patagonia and Ben and Jerry’s – two

companies that have been able to follow a values-led approach for years without compensating

profits. According to Mulqueen (2019), “[Patagonia’s] profits have quadrupled in the last handful

of years, with revenues approaching $1 billion” (para. 19).

Consumers are demanding more from companies today and it is imperative that brands

“start to live by their CSR message” (Weissman, 2020). And in order to do this, companies need

to be proactive and preemptive in their efforts – integrating CSR into company values from the

very beginning, rather than jumping to help a cause after a recent incident or crisis. Business

leaders should not only “reflect on what ethical guidelines they want to hold up in good and bad

times” (Nijhof & Jeurissen, 2010, p. 627), they should also consider employees’ intrinsic drive

and the social issues they care about to practice sincere commitment to CSR to tackle the complex

problems we face as a society.

Despite these findings, it is important to recognize the limitations of this project. This

research is grounded in theory-based research and an extensive literature review process. Further

empirical research will be beneficial in actually testing these ideas and providing statistical

conclusions that validate or invalidate these findings.

Secondly, perhaps the biggest limitation of this work is that it can be difficult to fully

understand whether CSR is extrinsically or intrinsically motivated to begin. Even though a

company may be abiding by their core values and have integrated practices that are socially

responsible, there may exist some gray area in why they choose to engage in CSR. It may be

difficult for an outsider to correctly judge a company’s motives for CSR; but if companies self-
 27

report their motives for “doing good”, bias will be a common factor - presenting an interesting

conundrum. Moreover, as government regulation increases and as more and more companies are

required to engage in some reporting system, it becomes even more difficult to assess to what

extent the company’s efforts are intrinsically motivated - if at all.

 28

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