Empirical Evidence: CSR & the Bottom Line

"High performance and high integrity are good for the bottom line."

Two scholars in the area of corporate social responsibility (CSR)--Robert L. Heath, Ph.D., and Lan Ni, Ph.D., both of the University of Houston--reached that conclusion after examining the research base. Their work constitutes one of the newest additions to the Institute for Public Relations' Essential Knowledge Project, an online guide to existing research translated into practitioners' language.

Social responsibility may seem like an issue for the ages. But as a serious management policy concern, the discussion really dates to the 1950s.

Always present is Milton Friedman's famous claim that publicly held companies should focus only on increasing profits by efficiently doing whatever they are in business to do. However, say Heath and Ni, "Most studies have identified a positive relationship (although not always linear) between CSR activities and organization performance as measured by various indicators such as shareholder returns, profit or marketing impact."

Maybe Friedman missed the impact of CSR on reducing business costs and bolstering profits.

Four Reasons For CSR

The authors offer four major justifications for CSR found in the research base. First, there is the moral argument--that CSR builds relationships by focusing on mutual interests and advancing from "inside-out" to "outside-in" communication.

Next is the rational and economic argument that a business hits peak performance only when trust is high and constraints are low.

The stakeholder perspective says that CSR leads to better understanding of publics and meeting their expectations (especially in an era where a local concern can go global with stunning speed).

Finally, the social capital perspective looks at CSR in the context of stockpiling goodwill. That lets the organization develop partnerships and deal with potential or actual crises.

Imperfect Connections

While the empirical connections between CSR and improved business outcomes aren't perfect, Heath and Ni offer a litany of studies that help make the case.

  • Research published in the Journal of Business Research in 2005 showed that if a nonprofit's supporters know that the organization has a beneficial relationship with a given company, it can predict consumer purchase intent.

  • The Journal of Marketing published field studies finding that CSR positively affects customer attitudes and how people identify with businesses. This not only increases purchase intent but also intention to contribute to the same charities that the company supports.

  • The CSR-profit relationship varies by industry and different performance indicators. Stock market measures lead CSR, while accounting measures lag according to a study in the Journal of Business Ethics by Beliveau, Cottrill and O'Neill.

  • A past study in the Journal of Marketing Research underscored the value of CSR when it relates to product quality and/or to social issues that consumers care about.

  • Researchers have uncovered clear evidence that cause marketing is effective. Awareness of a business's commitment increases its marketing impact (as published in the Journal of Academy of Marketing Science).

  • Finally, as early as 1993, Herremans, Akathaporn and McInnes were proving that business reputation correlates positively with financial performance (Accounting, Organizations & Society). The longitudinal study evaluated U.S. manufacturing companies and revealed that those with better CSR reputations outperformed those with poor reputations.

Even strategies for implementing CSR can be found in the body of research in this field. Heath and Ni also discuss useful measurement tools such as the CSR audit, "triple bottom line" (financial, environmental and social) reporting, communications inside and outside the organization, and a CSR ombudsman. The authors conclude that PR is the ideal place within the company for CSR leadership, writing, "Both as a 'listener' and communicator, public relations can aid organizations' ability to foster mutually beneficial interests proactively as a problem solver rather than reactively as lessons learned." PRN


This article was written by Frank Ovaitt, president & CEO of the Institute for Public Relations. He can be reached at iprceo@jou.ufl.edu or through http://www.instituteforpr.org. Dr. Robert L. Heath can be reached at rheath@uh.edu. Dr. Lan Ni can be reached at lni@uh.edu.