The relationship between corporate social responsibility (CSR) and company performance is a subject that has been the topic of much research, and has yielded mixed results. Companies commonly contribute to CSR issues in various ways, yet little is known about the actual effect it has on consumers’ perceptions of the company.
In response to a CSR issue, a company can contribute or donate in multiple ways. In its most basic form, the contribution can either be monetary or in-kind, meaning a donation in the form of volunteer work. Diogo Hildebrand’s article “Consumer Responses to Corporate Social Responsibility (CSR) Contribution Type” discusses the differences between monetary and in-kind contributions and how this may affect consumers’ perceptions of the company. Hildebrand reports that there is a distinct difference between the two, finding that monetary donations are viewed as less involved and less emotional, whereas in-kind contributions are seen as more empathetic and are a result of a greater moral identity. This, however, does not mean monetary donations are not effective, as Hildebrand highlights that the effectiveness of the company’s contribution hinges on the consumer’s perceived compatibility between contribution and the event. When consumers respond emotionally to a disastrous event, there is a step in the sense-making process where they measure the controllability of the event. They may ask, for example, “Was the event predictable or preventable?” The more controllable the event, the more ordinary it appears, and the event therefore elicits a lesser emotional response. In contrast, if an event is uncontrollable, the consumer will have a heightened emotional response. Referring back to the scale of emotionality with the monetary and in-kind donations, the type of contribution must match the event in terms of emotional scale in order to maximize the consumer’s positive perception of the company. To put it simply: the contribution and event must have matching perceived emotional value. This fluency between the event and the company’s response in turn affects the consumer’s response to the company, as “more fluently processed contribution-type information [produces] more positive company evaluations” and a “greater liking for the company” (Hildebrand, 2017).
Beyond the company’s contribution in response to the CSR issue, the effectiveness also derives from the information provided to stakeholders. The manner and level of which the information is disclosed is just as important as the actual contribution itself. Baraibar-Diez’ “The mediating effect of transparency in the relationship between corporate social responsibility and corporate reputation” explains that “corporate reputation is commonly understood as the perception of every stakeholder that their expectations have or have not been met by the firm, and the only way that stakeholders can assess whether this has occurred is through the information disclosed by the company” (Baraibar-Diez, 2018). The information given therefore “affects the perception of stakeholders about how the company significantly influences the reputation of the firm and is a key element to safeguard the identity of the corporation” (Baraibar-Diez, 2018). The disclosed information needs to not only be provided, but it also must be understandable, accessible, relevant, and posted in a timely manner. These “guidelines” can be simplified into the concept of transparency. “Corporate social transparency” assures that information is provided to stakeholders to maximise their rational decision making in “contributing to the company’s sustainable development” (Baraibar-Diez, 2018). In essence, transparency functions as a “mediator” between CSR and the company’s reputation (Baraibar-Diez, 2018).
Company contributions to CSR largely rely upon a company’s disposable income, any potential benefits to set it apart from its competitors or allow tax breaks, the extent to which the company is in the public eye, and the company’s interpretation of what CSR is. Baraibar-Diez, 2018, found that the more visible a company is, the more likely they were to engage in CSR, transparency in operations, and have a better reputation. A rise in consumers voicing concerns about CSR responsibilities has resulted in an increasing number of shareholders who are considering ethical decisions of companies when investing (Matten, 2006, pp. 11-12). As a result of rising demand for responsible and transparent, firms that choose to differentiate themselves from their competitors with an exceptional approach will likely see the prices of their stocks rise (Vogel, 2005, p. 61). However, most companies choose to remain in the average realm of CSR and view the ethical concerns as secondary concerns. Highly visible brands do face the risk of massive consumer backlash, should the public decide that the company is not behaving appropriately, and it could be said that CSR might be a way of managing those risks by allowing a company to present itself as a positive force.
Choosing to engage in CSR on their own terms makes it less likely that the public will call for government intervention, and allow companies to operate with fewer mandatory regulations. Every company engages in CSR for its own individual reasons and has their own approach, though overall industries and communities there might be similarities due to public pressure and local issues. On the industry side, pressure is exerted by rival companies to engage in CSR to improve brand image. It is a competition to portray a positive image to consumers by investing in society. Thus, it is more like a task or chore for those companies. On the other hand, many companies will engage on their own simply to reinvest and give back to their consumers. In a third more negative scenario, CSR is used is a way to take attention off of a negative impact on the environment. A company highlights their contributions to society to take away from less appealing operations they perform because it sheds a more positive light in the media. In regards to intentions, a company that is transparent about their activities and goals is more successful in their CSR efforts and is more likely to take CSR initiative.
Many ask whether engaging CSR will benefit the company in the long run. However, the real question to ask is, could it actually hurt? In a market with ever engaged consumers, it is nearly expected for companies to support society. A company's financial bottom line can be greatly affected by the addition of social and environmental responsibilities. “A Nielsen report released in October 2015 found 73% of millennials, which represent the largest consumer demographic in U.S. history, were willing to pay more for sustainable goods, an increase of 46% from 2014.” (Fontinelle, 2018) Labor conditions also play a large part. No matter how favorable the conditions are on the homeland, i.e cleaning the community, providing after school programs, consumers will be less likely to buy from a company that sources their raw materials from the use of slave labor. Fontinelle says “adding the "people" element of social responsibility to corporate bottom lines shifts the focus to the fair treatment of employees and off-site labor.”