molly tompkins

Corporate Social Responsibility: Does HOW and WHY Matter?

Background of Corporate Social Responsibility

By definition, corporate social responsibility is adherence to ethical standards, law and international norms. However, the concept has expanded to include pursuit of a greater societal good through either corporate philanthropy or commitment to a specific societal cause. Since the 1960s, corporate social responsibility has grown to become part of the core of the strategy of many large corporations. It is part of the mission of many companies to commit to a cause, however, the relationship the company has with that specific cause varies greatly.

Corporate social responsibility, often used as an umbrella term for company philanthropic practices, sustainable business and employee engagement, has become a popular phrase in business over the past decade. Instead of solely focusing on profits, businesses have shifted towards sustainable and philanthropic practices that create “shared value” for all of their stakeholders including employees, shareholders, the general public, and most importantly, customers. However, this value is difficult to quantify. How important corporate social responsibility initiatives are to customers and whether it changes customer opinion or behavior is often unclear. Corporations often market their products or services with philanthropic taglines, but donating an arbitrary percentage of proceeds to a specific cause might not be enough. Recently, corporations have been aligning with one or two causes and have either directly or indirectly used their products or services to fill a communal need.

Research: How and Why

My research question asks how and why corporations choose to commit to certain causes that align with their corporate strategy and mission when carrying out corporate social responsibility initiatives (referred to following this as CSR) and whether the public perception of companies differs based on this perceived link. I hypothesize that consumers respond positively, both in opinion and behavior, to corporations that choose to contribute to causes that logically align directly with their product or service and mission. Conversely, I expect consumers to respond negatively to corporations whose commitment to a cause is illogical or ineffective. In order to prove this link from a consumer standpoint, I conducted primary research from a consumer perspective in two phases: first, identifying companies on either side of the spectrum and analyzing their CSR performance in comprehensive case studies, and second, determining how consumers perceive that company. Ultimately, I hope to prove that corporations, in order to reach and influence consumers most effectively, should choose CSR initiatives that directly align with their company’s strategy and values.

Two Sides of CSR

Critics of CSR in general claim that many initiatives are simply a profit ploy or an insincere public relations campaign. While this may be true in the case of some corporations when evaluated from a customer perspective, many corporations are utilizing their business to make a positive impact, locally and globally. I will address examples of both in the form of case studies later in my paper. Within the last two years, there has been an over 50% growth in the number of corporations reporting their corporate social responsibility practices in the Global Reporting Initiative (Rangan 2). Ostensibly, the “shared value” proposition of corporate social responsibility impacts a myriad of stakeholders in the company, but this paper focuses specifically on consumer perspectives of companies based on their CSR practices. While CSR initiatives can range from “…corporate funding of community activities, grants for non-profits/NGOs, environmental sustainability programs to reduce energy and resource use…” etc., these practices are “inherently organic” and “respond to societal expectations and define CSR in terms of their own organization and social motives…” (Rangan 3). Some companies align with a cause that fits their organization’s core competencies, mission, values and product or service, while some commit to many different causes and the connection is not as clear.

However, “many scholars believe that incorporating CSR into the core values…can help acquire a competitive advantage” (Huang 2). Corporations are more successful when they strategically embark on CSR initiatives that align well with their company’s mission and goals, and consumers respond positively to CSR in general and are more likely to support companies who they believe “do good” for society. What remains unclear is whether companies aligning their CSR initiatives to their corporate culture, mission and core competencies etc. actually impacts consumer perception. This link is what I hope to prove through my primary research.

As with any other aspect of business, effective CSR requires strategy. Many corporations provide cash or in-kind donations to causes that directly align with their own, including IBM, a global technology product company and consulting firm, who donates computers through an in-house childhood technology education program (Rangan 6). With this particular commitment, IBM is using their company’s expertise to directly contribute positively to those in need. While particular connection is a simple and logical one, many corporations fail to draw these simple parallels.

Consumer Value of CSR

It is important to focus on consumer perspective of CSR as consumers drive public perception and play a significant role in profit-generation. As consumers become more informed and in charge of purchasing decisions in a technological age, they are empowered to make calculated decisions based on their opinions of a particular company. An informed consumer could investigate CSR further by looking on a corporation’s website to find information about its CSR initiatives and find glossy multiple-page PDFs detailing specific practices. Often, these PDFs highlight a specific cause and relate this back to their product or service, for example, Kellogg and childhood hunger. On the other hand, some companies provide a brief, dated PDF with a letter from their CEO discussing the sustainable business the corporation practices and its many different CSR initiatives. The disparity lies in not what corporations say they do, but how they present what they actually do, which comes across more clearly than one would think.

Corporate Value of CSR

Top business schools across the country and dozens of business journals have done extensive research on corporate social responsibility and based on that research, it is clear CSR has a proven positive impact on employees, company culture and recruitment. In fact, some companies are such proponents of committing to a cause in this way that they directly align their business strategy with CSR and see tangible benefits. A study surveying hundreds of consumers showed that CSR has a “significantly positive effect on corporate image” (Huang 6). There is significant literature proving that CSR improves customer image of corporations and has a positive effect on purchase behavior.

Significant research has been done on the different approaches to corporate social responsibility and the benefits of each. Research shows that pursuit of CSR initiatives often comes after societal crisis or a scandal within the company (Enron or the 2008 financial crisis for example), perhaps to make up for mistakes or win over consumers and stakeholders.  The secondary research I conducted proves two things: (1) companies are more successful when they strategically embark on CSR initiatives that align well with their company’s mission and goals, and (2) that consumers respond positively to CSR in general and are more likely to purchase from companies who they believe do “good” for society. The gap in literature I have found that I am attempting to fill through answering my own research question is the link between the two categories I outlined above. Through primary research in two phases, I hope to prove that consumer perspective is more positive when corporations commit to a societal cause that directly fits with their company.

Primary Research Phase 1: Case Studies

In this paper, I present case studies that are designated “positive” and “negative” examples of my argument done from my point of view as one consumer. While denoted “negative” examples, I do not intend to discount the CSR and philanthropic initiatives these corporations take on in any way. I am using these case studies for sake of argument regarding the alignment of CSR with a company’s product or service and mission, not the impact these initiatives have on society in general, whether positive or negative. For example, an argument against American Airlines’ commitment to breast cancer research is in no way against the initiative in general and is not meant to discount either the company or the cause. The viewpoint I am taking is one of a consumer and all information I use about the companies is taken from what is available on each company’s website, whether directly or in the form of a PDF report (see Appendix A). I only include four examples in this paper, and recognize the need for more extensive research on specific companies and their CSR initiatives. Particularly, extended research beyond this paper would focus on directly comparing companies’ CSR initiatives within the same or similar industries (for example, airline vs. airline).

Procter & Gamble

The Procter & Gamble Company (P&G) provides an admirable example of a corporation whose mission, values and products align directly with their CSR initiatives. A publicly traded, 121,000- employee consumer packaged goods company whose products are sold in over 180 countries worldwide through mass merchandisers, P&G clearly has a significant global influence and potential to make a positive impact (P&G). P&G’s main slogan is “Inspired by People,” which is fitting, considering its product segments are entirely people-facing: beauty, grooming, healthcare, fabric care, home care and baby and family care. This multinational corporation focuses on several areas of CSR to which its products directly contribute. P&G’s focus on “doing the right thing” and “investing in the communities in which we live, work and serve” is appropriate; their CSR includes donating everyday essentials to those in need. P&G’s disaster relief efforts meet human needs through their products, relying on company strengths and a disciplined process to provide mobile relief units and everyday products to victims.

The company partners with humanitarian organizations and is one of the first on the ground directly delivering products including Purifier of Water packets that transform dirty, unsafe water into drinking water in thirty minutes and mobile relief units that provide products and services to meet basic needs. Products in the P&G family have their own relief programs, such as Duracell Power Relief, a cause that provides mobile units including one ton of batteries, 1000 hours of power, computers and WiFi to those in wake of disaster. Similarly, Tide Loads of Hope brings mobile Laundromats to affected areas to wash, dry and fold clothes. These initiatives bring the P&G brand to the forefront of disaster recovery, impacting the lives of those in distress in a positive and tangible way. Many P&G brands have similar programs and the corporation is clearly committed to using their products to fill basic needs and improve daily lives of people worldwide. Their product-specific CSR initiatives align directly with their company’s mission and values and have a significant impact.

Kellogg

Kellogg provides an even more focused example of strategic CSR. Kellogg is a publicly traded company with over fourteen billion in annual sales and 31,000 employees worldwide, boasting hundreds of cereal, snack and frozen food products sold in 180 countries. As the world’s leading producer of cereal and the second-largest savory snacks company, Kellogg has the power to make a global impact. The company’s colorful 120-page Corporate Responsibility Report is published every two years and parallels its vision, “to enrich and delight the world through foods and brands that matter,” with CSR initiatives including reducing global hunger (Kellogg).

Kellogg’s corporate vision is to “enrich and delight the world through foods and brands that matter,” and their CSR initiatives do the same (Kellogg). Their CSR report explicitly states how important CSR is to the company’s overall strategy and success. The theme of “breakfast to feed better days and better lives” is conducive to community activism, and Kellogg follows through with this not only through their products, but also through their CSR. The company has committed to reducing hunger worldwide through providing 1 billion cereal and snack servings, over half of which must be breakfasts, to children and families and need globally by the year 2016 (Kellogg). Part of this large-scale CSR project is the Breakfasts for Better Days campaign, which focuses on the benefits of nutritious breakfast cereals and donates food products to those in need. Through direct and tangible food donations to low-income families and breakfast programs in schools worldwide, Kellogg is making a global impact on what they do best as a company—simple food. Each stakeholder group for the Kellogg brand, including employees, customers and shareholders, have outlined roles for community engagement and communication. Kellogg’s CSR is well-structured, well-defined and clear to consumers and the company comes across as a comprehensive, trustable and focused brand with a strong focus on giving back in concrete and effective ways.

American Airlines

As their mission states, American Airlines is “truly a global airline,” as one of the world’s largest airlines, operating a fleet of almost 900 aircraft to 250 cities in 40 countries with over 92,000 employees worldwide (AA). American commits to sustainability as a corporation, for example, their jet fuel is becoming increasingly more efficient and they recognize the large role the airline industry plays in fossil fuel emissions. However, their CSR initiatives (in terms of direct philanthropic commitment to a cause), are seemingly misaligned. According to the “Charitable Giving” section of their website, American “uses [our] scale and connectedness to influence widespread charitable action through direct philanthropic contributions…” (AA). These charitable efforts, while admirable, do not directly align with the company’s missions and goals, and based on the website, the scope of the initiatives is unclear.  A global leader in the airline industry, American supports many causes, none of which seem to relate. The company’s highlighted CSR initiatives include Kids in Need: “Supporting kids, families and organizations dedicated to improving quality of life” (AA). What that quality of life is, and how the different parties are supported by the airline, however, is also undefined. Kids in Need “provides worldwide support for children and their families…,” a vague goal. American supports dozens of children’s charities worldwide, however, and does list these organizations for the public eye. One original child-focused CSR initiative American boasts is the Something mAAgic Foundation, which allows employees to fulfill the wishes of children with life-threatening diseases, sending them with their families to a resort in Orlando, Florida. In addition, American contributes to breast cancer awareness and funds research, headlining fundraisers including Miles for the Cure, which awards customers bonus miles for “every dollar they contribute to Susan G. Komen for the Cure” (AA). How much is donated, however, and the airline’s reasons for choosing Komen specifically are left out. Other CSR initiatives championed by American through direct corporate donations, employee engagement or specific programs are military and veteran support, disaster aid and response and direct support of other charitable foundations, along with what is categorized as “general contributions” (AA). While nothing short of commendable, these CSR initiatives are not thematically united and do not align directly with American’s service or mission, which centers around providing “safe, friendly and dependable global air transportation” (AA).

Shell

Shell Global, an energy corporation with over 92,000 total employees worldwide, produces over 3.2 million barrels of oil every day and runs over 30 refineries in 70 countries (Shell). The $451.2 billion annual revenue company spends $149 million on undefined “voluntary social investments” (Shell). One of Shell’s notable CSR missions is to “Bring health care to the forecourt,” and the company offers HIV/AIDS clinics at many of its gas stations in highly impacted regions, notably South Africa (Shell). As a global company, Shell’s commitment to “helping to protect our people from HIV/AIDS, supporting those who are living with HIV/AIDS and their families, and working with others to slow the spread of AIDS” is a lofty one (Shell). The stations provide health services for staff and customers, and the clinics are quick and convenient and offer HIV counseling and testing. Many clinics are mobile and travel to different gas stations, servicing a wide range of areas. Doctors service the clinic and provide resources for drugs and care for those who test positive (Shell). Costs of HIV tests are actually split between Shell and service station owners, but it seems many of these initiatives are truly driven by local station owners, not the company itself. The Shell website includes several touching personal testimonies from some of these owners on how they have helped their employees and their communities, but the connection to the company is unclear. In Nigeria, Shell partnered with the government and non-governmental organizations to create Health-in-Motion, a program that provides mobile medical care to the poorest and most rural regions of the country. These are not organic Shell programs, but large previously existing partnerships Shell has joined to make a difference, mostly through donations. While gas stations are generally conveniently located and offer several services, one cannot make a clear and logical connection between oil and health care. The Shell HIV/AIDS prevention initiative is praiseworthy and helps many people who would not otherwise have access to affordable testing and care in highly impacted areas, including South Africa and Nigeria. However, this particular CSR project does not seem to fit logically with Shell as a company.

Primary Research Phase 2: Consumer Surveys

In 2013, Nielsen, “a leading global provider of information…on what consumers watch and buy,” conducted an internet survey of over 29,000 consumers in 58 countries on whether or not consumers are willing to pay more for goods and services produced by companies who have “implemented programs to give back to society” (Nielsen). The results were profound—50% of customers said they will and have paid more for companies with CSR initiatives. However, this survey highlights the gap in research I hope to fill; it asks simply about companies that “have” CSR initiatives, not the caliber or success of these initiatives. I constructed my own consumer perception survey based on the results of the four case studies I conducted. In this survey (see Appendix B), I asked customers to rate whether they would be more likely to purchase a good or service from a company based on their specific CSR initiative I highlighted on a scale of 1 to 4, with 1 being “unlikely” and four being “absolutely.” I also included a picture for each question, as I wanted to make the survey attractive to responders and hopefully increase my response rate through visual appeal. I posted a link to the Google Survey I created on a few University of Michigan Facebook groups populated by my peers and also directly emailed my survey out to friends, members of my business fraternity and family members. I recognize several limitations of this research, as the sample size of my survey is relatively small and my respondents are mostly University students. I tried to construct a survey that would limit as much bias as possible and asks respondents not to rely on their previous knowledge or perceptions when answering my questions. Within a span of three days, I received 75 responses to my survey. While limited, my survey results relay a trend I had anticipated (see Appendix B for full results). My “positive” example case studies, Kellogg’s and Procter and Gamble, had higher ratings on likelihood to purchase based on CSR initiatives than my “negative” example case studies, American Airlines and Shell Global. Specifically, 52/75, or 69.3% of consumers who responded to my survey said they were possibly likely or unlikely to purchase flights from American Airlines based on the company’s contribution to breast cancer research. Shell Oil proved similar, as 59/75, or 78.7% said they were merely possibly likely or unlikely to purchase Shell products based on the company’s commitment to HIV/AIDS awareness. Conversely, only 40 responders had the same views on Kellogg’s and childhood hunger, while 35 said they were likely or absolutely likely to purchase products because of this CSR initiative. While only 46.7%, consumers were most convinced by Kellogg’s cause. Procter & Gamble, a consumer packaged goods company offering a plethora of brands and products, is different in that is a less identifiable brand. Instead of boasting one main product or service, such as cereal or air travel, P&G has many and the umbrella brand is not as recognizable. Survey results were divided for P&G, as the vast majority of responders (60/75 or 80%) said they were either likely or possibly likely to purchase goods based on P&G’s disaster relief programs.

Based on my case studies and subsequent survey results, it is clear consumers think twice about whether or not they will purchase goods or services from a company when presented with their CSR initiatives. Although I cannot draw a strong and specific correlation between the caliber of CSR initiatives (based on cause/company alignment and fit) and consumer behavior, the results of my research are intriguing. However, one thing is clear: my results met my expectations. Based on my survey results, on average, consumers are more likely to purchase goods and services from companies who exhibit strong and logical CSR practices (my “positive” example companies). This preliminary conclusion is only the beginning of proving my hypothesis and leaves room for further, more comprehensive research.

Future Research

While my research findings align with my expectations, they only begin to fill the gap in research I identified. Due to time constraints, the scope of my project was limited to only four case studies and a short survey, but the results show that there may be a link between customer perception of companies and the caliber of their CSR initiatives in terms of mission and goals. I plan to continue my research through an independent study in the Ross School of Business, in which I will utilize professor guidance to expand the scope of my research. I hope to eventually conduct dozens of comprehensive case studies and create a more comprehensive and formal survey with a large and diverse sample and little room for bias comparing the CSR initiatives similar companies. I anticipate that this further research will lead to more nuanced conclusions on particular forms of CSR and customer opinion and behavior.

Corporate Social Responsibility