Is Corporate Social Responsibility not worthwhile for companies?

Corporate Social Responsibility (CSR) does not pay off financially for companies! At least this is the conclusion of Professor Rost and Professor Ehrmann in a meta-study published in 2014 [1], in which they statistically evaluated a total of 162 studies on this topic.

Companies that implement CSR as a concept in their corporate strategy show better financial performance in the long term (CFP): However, this positive correlation, which has been proven several times in the literature, is not a correlation at all, but is merely the result of an asymmetry in publication practice. Accordingly, with very few exceptions, the publications examined show positive effects, while results that see a negative influence between financial performance and social commitment are not published.

The purely theoretical existence of such studies was demonstrated using a statistical method that had already been successfully applied to clinical trials. In this area of research, it was possible to prove that there were indeed studies whose results were actively withheld. At first sight, it is therefore understandable to apply this method to this meta-study on the effects of CSR on CFP. However, it must be borne in mind that the research question and the design of clinical studies are very different from the subject of this meta-study. As to how this biased publication practice can occur, the researchers reason that there is a lack of a balancing economic model that sees a negative relationship between CSR and CFP. Researchers would therefore have to publish against the mainstream. They would have to ask themselves whether such a study would be published at all and whether there would be further research funding and project approvals, which in turn depend on the publication rate. In fact, this is a problem that should not be underestimated, which means that one cannot completely ignore this argument.

In their conclusions, the authors then also give reasons why CSR and CFP cannot have any influence on each other and why the result of this study was therefore to be expected. These arguments will be discussed in more detail below.

Does CSR only pay off in the beginning?

The research team refers, among other things, to a model which states that CSR only pays off financially at the beginning, but later the success is nullified by the fact that other market participants copy the behaviour.

This is a phenomenon that can often be observed not only in CSR, but also in innovation in general - the "first to market" entrepreneur is always willing to be copied if his product or service sells well or achieves positive publicity as a result. This is thus even an argument in favour of CSR. After all, if it is worthwhile for the first, it will be worthwhile for the followers. In the case of innovations, the inventor can protect himself through patents, but not in the case of CSR. The task of CSR culture, then, is to keep evolving in order to maintain the advantage vs.

There is a lack of a balancing economic model that sees a negative relationship between CSR and CFP.

over other market participants. Just as it applies - despite patents - to all innovative companies that want to maintain their market advantage. In the "CSR market", innovations have therefore been developed by companies with a pioneering spirit, in cooperation with NGOs or competent consultants, among others. For example, social standards, such as ISO 26000 or SA8000, which demand fair working conditions, or fair-trade organic products, which can now be bought in almost all grocery stores. If this commitment were not worthwhile on the bottom line, such products and standards would never have become established.

Is CSR only useful for crisis management?

Stakeholders reward appropriate behaviour only initially - over time this effect levels out and may even have a negative financial impact. Only in the case of unforeseen negative events - so the argumentation goes - does a company with a positive CSR image suffer fewer losses on the financial markets.

However, every company that wants to survive on the market in the long term must be prepared for precisely these possible, unforeseen negative events! This is exactly what active risk and CSR management is all about. NIKE, BP and currently VW clearly show what financial losses a company can incur from a single major event if such risks are ignored, consciously or unconsciously.

A practiced CSR and risk management naturally costs the company resources and usually has no measurable influence on the financial success in the short term. The competition can use these resources differently and thus has certain advantages. Nevertheless, for a growing number of investors, sustainability performance is becoming more and more important in company valuation. Which in the end becomes an advantage for sustainably oriented companies.

Do donations reduce profits?

The CFP decreases when a company receives benefits in return for donations, e.g. to a museum - for example, a seat on the governing body there.

Companies are embedded in a community and benefit from it - for example in the form of well-trained employees, infrastructure or stable political conditions. Through social security contributions and taxes, they in turn finance some of the government services they use. Some companies