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 connection led to an intriguing inquiry: Are the extra sales generated by CSR disclosures attracting new clients, or are they merely enhancing purchases from the current 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.
However, the results also revealed challenges.
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?
To our surprise, we discovered the contrary. Businesses releasing CSR reports seemed to discourage potential suppliers. This may stem from the fact that suppliers frequently bear extra expenses when a business focuses on social responsibility.
Depending significantly on suppliers may become expensive for companies. When suppliers notice that a business relies on them, they might prefer cash payments over offering credit. This decrease in credit options can put pressure on a company’s cash flow, resulting in fewer resources available for investment.
Thus, while CSR disclosures can attract customers, they may alienate suppliers—posing a potential downside.
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.
Although the U.S. does not obligate businesses to publish CSR reports, other countries, including China, do. Starting in 2009, every publicly traded company in China has been required to file yearly CSR reports, which laid the groundwork for our research.
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.
In light of these developments, the need for empirical evidence on the costs and benefits of CSR reporting is greater 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 analyzing companies’ public disclosures to assess their environmental risks and the measures they’ve taken to mitigate them. Second, I am investigating how CEO incentives influence corporate environmental disclosures, actions, and spending—or the lack thereof.
