Impact Of Corporate Social Responsibility On A Companys...

To what extent is Corporate Social Responsibility (CSR) beneficial to a company’s performance? Sub-prompt: Evaluate how CSR can be beneficial to company’s financial performance. 1. Introduction Corporate social responsibility (CSR) has become more influential when making company’s decisions. 53% of the SP, an index based on market capitalizations of 500 U.S. companies, has published CSR reports in 2012 as compared to 19% in 2011. An approach, suggested by Business for Social Responsibility, considers CSR as attaining commercial success through respecting people, community and the natural environment. McWilliams Siegel (2011) added that CSR are actions that far beyond the company’s interests and the minimum requirement by the law.†¦show more content†¦Section three comments the limitations of empirical findings and CSR. 2. Impacts on Financial Performance 2.1 Cost Companies committed to CSR are expected to reduce operating costs. One of the key areas in CSR practices is paying attention to environmental issues such as energy saving and avoidance of excessive use of inputs. The promotion of resource efficiency including using less energy and water lower the utility costs. Nonetheless, a reduction in the use of packaging materials helps to reduce production cost. Brand equity has been viewed as the most crucial intangible assets of the company. Cornell and Shapiro (1987) suggested that the firms are able to establish reputation capital if they adopt CSR measures. Customers are more willing to spend on products that are produced by companies with good brand images. An adverse example has illustrated the importance of brand image with the scandal of Primark, a well-known fast fashion clothing chains. The clothing retailer is found to break its code of conducts and employ illegal workers in poor working conditions. When BBC revealed the dishonored behavior, it cost Primark millions of dollars in information and advertising campaigns to restore consumer loyalty. It implies that a socially responsible firm that follows CSR practices can have less risk of negative rare events and thus avoid unnecessary cost. 2.2 Revenue A numerous empirical findings have revealed a positive correlation between