Essay: Corporate Social Responsibility: Evolution, Importance, and Impact on Organizational Behavior

1. Introduction

The enthusiasm for Corporate Social Responsibility (CSR) is growing among organizations, yet the reasons for this growing interest are variable. Nonetheless, the commitment to CSR can largely be explained by increasing pressure from stakeholders (McWilliams et al., 2006). This pressure is not only expressed by customers but also by employees, suppliers, non-governmental organizations, and governments. The interest in CSR has particularly grown in multinational, multidisciplinary organizations that are exposed to various business models, regulations, legal frameworks, and stakeholder demands for CSR in the countries where they operate. A recent development in the field is a new EU regulation on the reporting commitment of CSR in large companies, which was introduced in 2014 and puts more pressure on companies to engage in socially responsible activities (European Commission, 2015). According to this regulation, all European companies with more than 500 employees are obliged to report on policy information, risks, and results regarding environmental, social, and employee-related aspects, as well as on anti-corruption and bribery issues and board diversity.

While pressure from stakeholders is a significant motivational factor, other reasons for CSR commitment include competitive advantages, such as increased market share and employee motivation. Research shows that CSR activities not only provide benefits to the company but also lead to increased costs, including one-time and ongoing expenses. There is also a risk of CSR commitments failing, which can lead to disputes among stakeholders and potentially harm the company (Weber, 2008; McWilliams et al., 2001; McWilliams et al., 2006).

There is extensive literature on the relationship between CSR and financial services. However, past research has shown inconsistent evidence of the impact of CSR activities on financial performance. Positive, negative, and neutral relationships have been observed, and there are no clear incentives for companies to engage in CSR based on these studies. Many of these studies have conducted regressions on variables that are not clearly defined, which can be seen as a gap in CSR research, where terms and measurement systems vary and are not comparable. This literature review will discuss various positive impacts and will not support the positive impact of CSR on the financial performance of the organization, including an analysis of the non-significant relationship and the effect of CSR disclosures.

1.1 History of CSR

The idea of Corporate Social Responsibility (CSR) has a long history of influencing the behavior of organizations. To understand the impact of CSR on organizational behavior, it is necessary to understand its development. Carroll (1999) noted that references to social responsibility concerns emerged primarily in the 1930s and 1940s. In a more practical sense, it is interesting to note that in 1946, Fortune magazine executives discussed their social responsibilities (Fortune, 1946, cited in Carroll, 1999). Carroll (1999) also noted that formal writing on CSR began particularly in the twentieth century.

In the 1950s, the focus was on corporate responsibility towards society and for society. The 1960s saw significant social changes, with events, people, and ideas playing a crucial role in shaping the concept of social responsibility. In the 1970s, business leaders integrated corporate social responsibility into traditional management functions. By the 1980s, companies began reconciling their operations with the social interests of society, becoming more sensitive to the needs of their stakeholders. In the 1990s, the idea of CSR became widely accepted and was linked to strategic management. Finally, in the 2000s, CSR became a critical political issue (cited in Madrakhimova, 2013).

It is clear from the statements of various experts that, although the concept of social responsibility dates back before the twentieth century, the bulk of literature on CSR has emerged since the 1950s. Since then, CSR has become a significant area of interest in many societies worldwide. Organizations have increasingly shown concern for the community and have been developing in this direction and value.

Evolution of CSR

CSR has evolved significantly over the decades. Initially, it was seen as an obligation for businesses to contribute to society, primarily through philanthropy and charitable donations. However, as the concept matured, it expanded to include broader issues such as environmental sustainability, ethical business practices, and stakeholder engagement.

• 1950s: The 1950s marked the beginning of formal discussions on CSR, with an emphasis on the role of businesses in supporting societal welfare. Howard Bowen’s seminal work “Social Responsibilities of the Businessman” (1953) laid the foundation for modern CSR, highlighting the importance of businesses considering the social implications of their actions.
• 1960s: The 1960s witnessed significant social upheavals, with movements advocating for civil rights, environmental protection, and consumer rights. These societal changes influenced businesses to adopt more socially responsible practices. During this period, the concept of “corporate citizenship” began to take shape, emphasizing the role of businesses as responsible members of society.
• 1970s: In the 1970s, CSR became more integrated into corporate management practices. Companies started to recognize the strategic value of CSR in building a positive reputation and fostering stakeholder trust. This decade also saw the rise of regulatory frameworks addressing environmental and social issues, prompting businesses to adopt more responsible practices.
• 1980s: The 1980s marked a shift towards a more comprehensive approach to CSR. Businesses began to reconcile their profit motives with social and environmental considerations. The concept of “stakeholder theory” gained prominence, suggesting that businesses should consider the interests of all stakeholders, not just shareholders, in their decision-making processes.
• 1990s: The 1990s saw the widespread acceptance of CSR as a strategic business practice. Companies recognized that CSR could be linked to competitive advantage and long-term sustainability. The concept of the “Triple Bottom Line” (Elkington, 1994) emerged, emphasizing the need for businesses to focus on social, environmental, and economic performance.
• 2000s and Beyond: In the 2000s, CSR became a global phenomenon, with businesses across the world adopting responsible practices. CSR reporting and transparency became standard practices, driven by stakeholder demands for accountability. The United Nations Global Compact (2000) and the Global Reporting Initiative (GRI) provided frameworks for businesses to report on their CSR activities.

Factors Driving CSR Adoption

Several factors drive the adoption of CSR practices by businesses. These include:

1. Stakeholder Pressure: As mentioned earlier, pressure from stakeholders such as customers, employees, investors, and governments drives businesses to adopt CSR practices. Stakeholders increasingly expect businesses to act responsibly and contribute to societal well-being.
2. Regulatory Requirements: Regulatory frameworks and guidelines, such as the EU regulation on CSR reporting, compel businesses to adopt responsible practices. Compliance with these regulations is essential for maintaining legal and operational legitimacy.
3. Reputation and Brand Value: CSR enhances a company’s reputation and brand value. Businesses that engage in responsible practices are perceived positively by stakeholders, leading to increased customer loyalty and trust.
4. Competitive Advantage: CSR can provide a competitive advantage by differentiating a company from its competitors. Responsible practices can attract socially conscious consumers and investors, leading to increased market share and financial performance.
5. Employee Engagement and Retention: CSR initiatives contribute to employee satisfaction and motivation. Employees who feel that their company is making a positive impact on society are more likely to be engaged and committed to their work.
6. Risk Management: CSR helps businesses manage risks associated with social and environmental issues. By proactively addressing these issues, companies can avoid potential legal, reputational, and operational risks.

Conclusion

The growing interest in CSR among organizations is driven by various factors, including stakeholder pressure, regulatory requirements, reputation, competitive advantage, employee engagement, and risk management. The history of CSR reveals its evolution from a philanthropic activity to a strategic business practice integrated into core operations. Despite the benefits, CSR also involves costs and risks, highlighting the need for careful implementation and alignment with business objectives.

By understanding the historical context and factors driving CSR, businesses can effectively integrate responsible practices into their operations, contributing to sustainable development and enhancing their long-term success. The ongoing commitment to CSR reflects a broader recognition of the role of businesses in addressing societal challenges and promoting overall well-being.