Do Corporate Social Responsibility Engagements Lead to Real Environmental, Social, and Governance Impact?

Abstract

We construct an event-based outcome measure of firm-level environmental, social, and governance (ESG) impact for public and private firms globally from 2007 to 2015 using data from RepRisk. Then we measure the societal impact of corporate social responsibility (CSR) engagements using participation in the United Nations Global Compact (UNGC) as a proxy. We demonstrate a robust and striking difference between public and private firms: whereas private firms significantly reduce their negative ESG incident levels after UNGC engagements, public firms fail to do so and are more likely to engage in decoupled CSR actions—actions with no subsequent real impact. We then conduct a series of in-depth analyses to examine possible economic mechanisms. Our results are most consistent with shareholder–stakeholder conflicts of interest being the main moderator of decoupling. The intensity of this conflict is further moderated by three factors: ownership type, proximity to final consumers on the value chain, and specific ESG incident types. Other possible mechanisms, such as selective entry into UNGC and heterogeneities in media exposure, country representation, and entry timing, do not survive our analysis. Our results suggest that existing CSR engagements and one-size-fits-all CSR policy mandates might not necessarily lead to better societal outcomes, and a multi-tiered policy targeting different ownership and industry types might be more efficient at maximizing ex post ESG benefits.

How High-Polluting Firms Suffer from Being Distracted form Intended Purpose: A Corporate Social Responsibility Perspective

“…Compared with stakeholders-related activities, the role of shareholders-related activities is not sensitive to financialization in promoting corporate innovation. This finding is consistent with the results of Li and Wu [ 13 ], suggesting that some CSR activities are always being regarded as a kind of business strategy in high-polluting industries. In addition, the shareholders-related activities of SOEs cannot be influenced by investments in financial assets, while their stakeholders-related activities are sensitive to financialization.…”

“…In order to maximize the profits of shareholders, high-polluting firms may regard some CSR engagements as a special business strategy, which can also promote corporate performance [ 31 ]. Li and Wu pointed that there is a performance gap of CSR engagements between stakeholders-related and shareholders-related activities [ 13 ]. The findings of Cupertino et al also found this performance gap, indicating that financialization can promote the capital accumulation of firms with some social responsibility practices [ 32 ].…”

“…It is interesting that stakeholders-related activities in high-polluting industries was at a surprisingly low point in 2014, and this might be caused by the promulgation of The Environmental Protection Law [ 3 ]. For high-polluting industries, managers pay more attention to profit maximization and resource exploitation, and this can trigger an argument that whether there is a close association between CSR and corporate innovation [ 13 ].…”

Foreign subsidiary CSR as a buffer against parent firm reputation risk

“…As of April 2020, the dataset included more than 140,000 companies associated with risk incidents. This dataset has been adopted by various scholars to measure crisis (Dinner, Kushwaha, & Steenkamp, 2019;Li & Wu, 2020;Wang & Li, 2019). For example, Dinner et al (2019) used RepRisk data to measure marketing crises and examined the influence of psychic distance on MNE performance during marketing crises.…”

A United Nations’ Sustainable Development Goals perspective for sustainable textile and apparel supply chain management

“…Sustainability and green supply chain management are very important for business operations nowadays ( Li et al, 2019 , Kalkanci and Plambeck, 2020 , Li and Wu, 2020 , Wu et al, 2020 ). United Nations’ new sustainable development agenda for 2030 has come into force since 2016, which initiates 17 sustainable development goals (SDGs).…”