How Corporate Social Responsibility (CSR) Affects the Company’s Financial Performance and Brand Image

 

 

 

How Corporate Social Responsibility (CSR) Affects the Company’s Financial Performance and Brand Image

 

 

 

 

 

 

 

 

 

 

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Introduction

The research question is on the influence of CSR on the firm’s performance and brand image. The concept of Corporate Social Responsibility (CSR) was initially proposed by Oliver Sheldon in his book ‘The Philosophy of Management’ in 1924. He argued that ethical factors in business operations are not only contained in the pursuit of profit maximization but also include the satisfy customer demand (Sheldon, 2003)

CSR Relationship with Financial Performance and Brand Image

CSR is believed to be having a positive effect on the company’s financial performance and brand image. However, some scholars like Friedman, Mackey, and Barney take a negative attitude towards it. The fundamental reason for this divergence is fulfilling CSR needs cost. It may harm the company’s performance. For example, Friedman (2009) believes that CSR impairs enterprises’ survival and development. To be more specific, the cost of CSR increases the expansion of the company. It harms the company’s finances, thereby affecting the company’s development. However, most scholars believe that the profit that comes to CSR will be more remarkable than its cost and improve its brand image at the same time. Therefore, in this study, the objective is to analyze if CSR will positively or negatively impact the company’s financial performance and brand image.

 Relationship Between Financial Performance and Brand Image 

Financial performance is a subjective measure of how a firm uses its assets from its primary business model and generates revenues. It identifies how well a company generates revenues and manages its assets, liabilities, and stakeholders’ financial interests.

The brand image refers to the way a market as a whole view for a company or product. Many companies attempt to create a strong brand that people identify with a given product. (Wheeler, 2017).

 Optimistic Relationship Between Brand Image and CSR 

Consumers are more inclined to support disaster relief-type charitable activities by enterprises to assume their social responsibilities. Disasters are atypical behavior to test whether companies are willing to give up their interests and provide the best opportunity for companies to fulfill their social obligations (Ellen et al., 2000). When corporate resources are used to improve social welfare, it will enhance its relationship with key stakeholders, such as consumers or potential employees. Therefore, enterprises taking more social responsibilities can significantly increase their social capital and significantly affect their social network. After that, establish a good social reputation and public image among stakeholders (Xu and Yang, 2009). Therefore, CSR will have a positive impact on the company’s brand image.

Positive Relationship Between Financial Performance and CSR 

Regarding the relationship between CSR and corporate financial performance, Waddock and Waddock (1997) pointed out three academic views. The first is the negative relationship between the two. Neoclassical economists such as Friedman believe that the performance of CSR will lead to competitive disadvantage. The second view is that the two are not related. The third view is that they have a positive relationship. Both the stakeholder theory and the triple bottom line theory support this view. Empirical research by scholars shows that most studies support CSR have a positive connection with corporate financial performance. According to the survey, the student’s opinion is that CSR and corporate financial performance have a positive relationship.

Bibliography

Ellen, P.S., Mohr, L.A., and Webb, D.J., 2000. Charitable programs and the retailer: do they mix?. Journal of retailing, 76(3), pp.393-406.

 

Friedman, M., 2009. Capitalism and freedom. University of Chicago press.

 

Sheldon, O., 1924. The philosophy of management. Pitman.

 

XU, S.K., and YANG, R.D., 2009. An Empirical Study on Corporate Social Responsibility of Chinese Firms and Its Impacts on the Corporate Social Capital [J]. China Soft Science, 11.

 

Waddock, S.A., and Graves, S.B., 1997. The corporate social performance–financial performance link. Strategic management journal, 18(4), pp.303-319.

Wheeler, A., 2017. Designing brand identity: an essential guide for the whole branding team. John Wiley & Sons.