In an effort to attract customers, companies like Amazon and Zoom have been highlighting their corporate social responsibility (CSR) efforts through detailed reports.
These documents enable companies to present their efforts that positively impact employees, clients, neighborhoods, and the environment—emphasizing goals that extend beyond mere profit-making. Studies suggest that reporting on CSR is associated with a rise in sales.
As a marketing professor, this correlation prompted a compelling question: Are the additional sales driven by CSR disclosures coming from new customers, or are they simply boosting purchases from the existing customer base?
In a recent investigation involving the examination of numerous Chinese companies, a collaborator and I aimed to address this inquiry. Our results indicated that CSR disclosures lessen a company’s dependence on its current clientele by 2.1%.
This outcome is encouraging for companies—it shows that the extra sales are being fueled by new clients who are favorably impacted by the firm’s CSR initiatives.
Nonetheless, the outcomes additionally highlighted difficulties.
In order to boost sales, businesses frequently find it necessary to broaden their supply acquisition. This leads to the following inquiry: Do CSR disclosures aid companies in gaining new suppliers?
Surprisingly, we found the opposite. Companies that issued CSR reports appeared to deter new suppliers. This could be because suppliers often shoulder additional costs when a company prioritizes social responsibility.
Relying heavily on suppliers can become costly for businesses. When suppliers recognize that a company depends on them, they are more likely to demand cash payments instead of extending credit. This reduction in credit availability can strain a company’s cash flow, leaving fewer resources for investment.
Therefore, although revealing CSR activities might draw in clients, it could also drive away suppliers, presenting a possible drawback.
Although earlier studies have shown that CSR disclosures have the potential to increase sales, it was not evident if these sales came from new or current customers. Our research offers insights that can assist in business decision-making.
This insight is also relevant to policymakers, regulators, and advocates for corporate responsibility, who are debating whether CSR reporting should become mandatory.
While the U.S. does not require companies to issue CSR reports, other nations, such as China, do. Since 2009, all public companies in China have been mandated to submit annual CSR reports—a requirement that provided the foundation for our study.
Interestingly, the U.S. Securities and Exchange Commission has thought about the possibility of mandating CSR disclosure. Until such regulations are established, numerous American firms will probably keep issuing these reports on their own initiative.
Considering these advancements, the demand for empirical data regarding the advantages and expenses of CSR reporting is more crucial than ever.
Future Directions
Growing concerns about extreme weather events and their associated human impacts have piqued my interest in environmental responsibility. I am currently working on two research projects in this area.
First, I am examining corporations’ public statements to evaluate their environmental risks and the steps they’ve implemented to address these issues. Second, I am exploring how CEO motivations impact corporate environmental statements, initiatives, and expenditures—or the absence of such measures.
