Stop Talking About How CSR Helps Your

Bottom Line
 Stephan Meier
 Lea Cassar

January 31, 2018

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Taira Kurihara/Getty Images

Companies are starting to care more about corporate social responsibility (CSR). Among the
largest 250 companies in the world, 92% produced a CSR report in 2015, informing shareholders
and the public about the firm’s activities. That’s up from 64% having such a report in 2005.
Today, Fortune Global 500 firms spend around $20 billion a year on CSR activities.

Companies are also finding that CSR efforts — such as sustainability initiatives, corporate
foundations, employee volunteer programs, and donations to charity — can be important tools
for attracting and motivating employees. Research has shown that various forms of prosocial
incentives (workers get rewarded not with money, but with the firm engaging in some act to
benefit society) indeed increase productivity in simple and complex tasks, increase retention, and
even lower employees’ wage demands.

It’s no surprise then that more firms might be investing in CSR. But our research shows that
firms should not pursue CSR simply for benefits like greater productivity. We found that if
employees think their company is using CSR initiatives instrumentally — trying to engage in
prosocial activities only to benefit from it — then they’ll react negatively and put in less effort.
In other words, while these initiatives will benefit society, they will backfire for companies if
people think they’re being used for the wrong reasons.

To investigate this, we designed an experiment with an Italian firm. We hired around 3,000
workers on Amazon Mechanical Turk (M-Turk) to create taglines for products that the firm
could use on their English website. Workers were asked to come up with three slogans as the
baseline. We randomized participants into four main treatments that had differing incentives. We
offered incentives to get participants to generate an additional three slogans: We told half the
main sample they would get private, monetary bonuses; we told the other half that the firm
would donate to charity for the additional work.

But while we told half of both groups that the company would give the incentive whether or not
they did the extra work, we told the other half the incentive would be given only if they came up
with the extra slogans. This condition was supposed to make them see that the incentive was
profit-maximizing (instrumental) for the firm — because the size of the incentive was half of the
baseline pay, that meant it would be cheaper for the firm to incentivize them to contribute three
more slogans than to hire a new worker. Finally, we also had a control group of workers who
received only the baseline payment without any other incentives.

Additionally, we conducted a vignette study in which we presented a different pool of

respondents from M-Turk with one of two scenarios. In both scenarios, a firm committed to
annually donating part of its profit to a renowned charity. However, one scenario said that the
CEO only decided to commit after market research confirmed that the donation would be
profitable for the firm. The other scenario said the CEO decided to make the donation without
doing any market research, just because it was the right thing to do. We then asked respondents
how attractive it would be to work for the firm and how they viewed the firm in general.

Our experiment revealed four main findings. First, monetary incentives and charitable incentives
worked differently. While making monetary incentives conditional on performance increased
effort (that is, people were more likely to submit three additional slogans when the bonus was
tied to outcome than when it was just given), making charitable incentives conditional backfired.
Only 49% of workers submitted additional slogans when the donation to a charity was tied to
their extra work, compared with 54% of workers who did extra work when the donation was
made independent of their effort. In other words, when the company only donated if it gained
from employees’ extra work, employees were less motivated to do that work.
Second, when we surveyed these workers about their opinions of the Italian firm, we found that
those who were offered conditional incentives (both monetary and charitable) rated the firms as
less socially responsible than those who were offered non-conditional incentives.

Third, we saw that the effect of a conditional charitable donation was particularly strong for
workers who seemed less interested in charity in the first place. Our survey of these workers
asked about whether they regularly donate or volunteer to charity. We found that workers who
said they seldom donate or volunteer were even less likely to submit extra slogans to support
charity when that support was conditional on their work. This makes sense if you think about it:
They were not as motivated to work harder to support a social cause, and they still got a negative
impression of the firm’s motives. We saw that 54% of those workers created more than three
slogans when they were told a donation would be automatic, but only 43% did so when the
donation actually depended on their effort.

Fourth, prosocial incentives in general backfired compared with the control group: We found that
more workers (61%) were doing three more slogans when they were simply asked to do it than
when they were offered a charity incentive. The proportion of workers who did extra work
dropped to about 52% with charitable incentives. So even the workers who saw that the company
would donate to charity irrespective of whether they sent in more slogans were less likely to do
the extra work than workers who were asked for more slogans with no additional incentive. We
believe this is because the simple act of announcing the firm’s charitable donation could be
perceived as instrumental or strategic to increase workers’ effort.

The results from our vignette study also suggest that employees care about the intentions behind
companies’ CSR activities, not just the positive impact those activities have on society. We
found that when CSR was made strategically — that is, conditional on a positive outcome from
the market research study — respondents rated the firm as less attractive, viewed the firm as less
socially responsible, thought the donation was less generous, thought the donation would be less
effective in motivating workers, and said they would be less likely to accept a lower wage to
work at the company.

Taken together, these results suggest that using CSR instrumentally to increase profits might
destroy the very benefits it hopes to achieve. But it’s important to note that our setting had three
important limitations. First, our workers were recruited on Amazon Mechanical Turk and are a
selection of (gig) workers. We couldn’t investigate the effect of intentions behind CSR on a
firm’s actual employees. Second, charitable giving is only one form of CSR, and making
charitable incentives performance-based is only one type of instrumental CSR. Workers could
react differently to other types of activities. Third, in our experiment workers were randomly
assigned to the treatments, which means they were not allowed to sort into specific incentive
schemes. One might expect that workers who care more about charitable initiatives are more
likely to choose companies that invest highly in CSR. This sorting is likely to mitigate the
negative effect of prosocial incentives for such companies. However, companies that are not
renowned for their CSR activities may have a pool of less-prosocial workers, which could
accentuate the negative effect found in our study. Hopefully these limitations will motivate
follow-up studies.
Overall, our study indicates that firms probably should not use CSR initiatives as merely another
tool to benefit their HR strategy. Workers care about the genuine use of prosocial incentives and
may react negatively to firms using social initiatives to increase productivity or profits. Just as
we care about other people’s intentions as well as their actual behavior, workers care about why
firms offer CSR incentives, not just how much good they do. It is a tricky balance to get right.
But our research suggests that prosocial incentives whose main goal is to increase the firm’s
profit can backfire. Managers need to genuinely care about the social impact of their CSR
actions — only then will workers reward it with higher productivity.