Corporate social responsibility (CSR) and its impact on their financial performance

Abstract

The issue of CSR is more topical than ever. In a perpetual evolution world, the profitability of companies is no longer the only concern of managers, driven by consumers who are increasingly critical and demanding of companies.

At first glance, financial performance (FP) seems at odds with the logic of CSR. Corporate social responsibility defines the position of a company in relation to its environment, while the notion of performance questions the sometimes delicate link between the articulation of resources and the achievement of one or more results. However, the operationalization of these two constructs has led many authors to identify the same indicators and the same criteria. Determining the nature of the interaction between corporate social responsibility (CSR) and financial performance has been the subject of numerous empirical studies.

 However, the operationalization of these two concepts leads many authors to identify the same indicators and the same criteria.

Determining the relationship between corporate social responsibility (CSR) and financial performance has been the subject of numerous empirical studies. Yet the accumulated evidence on the nature of this relationship is equivocal. 

Through this article, we generally aim to review the different theoretical explanations for the relationship between corporate social responsibility and financial performance. In this respect, we will first clarify the main institutional, managerial and theoretical definitions of CSR, as well as the definitions of some of the concepts that relate to this notion, also its genesis. Then, we will clarify and analyze the causal links between corporate social responsibility and financial performance.

Indeed, there are many theoretical hypotheses linking these two concepts. In 2005, Allouche and Laroche identified nine such hypotheses, proposing the existence of a positive, negative, mixed, neutral or complex link between these two constructs. Thus, things become more complicated when considering the direction of causality, i.e., does corporate social performance influence financial performance or the opposite, or is there a reciprocal impact ?

In addition, the reasons commonly identified to explain the diverse and contradictory results are the difficulty of measuring the two concepts involved, the sample used, the methodologies adopted and the insufficient consideration of control variables.

JEL Classification : M14

Paper type : Theoretical Research