To appeal to consumers, enterprises such as Amazon and Zoom have been emphasizing their corporate social responsibility (CSR) initiatives through comprehensive 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 study analyzing several hundred Chinese companies, a colleague and I sought to answer this question. Our findings revealed that CSR disclosures reduce a company’s reliance on its existing customers 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.
While previous research has established that CSR disclosures can boost sales, it has been unclear whether these sales are sourced from new or existing customers. Our study provides clarity that can guide business decision-making.
This understanding is equally pertinent to legislators, authorities, and supporters of corporate accountability, as they discuss the potential requirement for CSR reporting to be obligatory.
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.
In light of these developments, the need for empirical evidence on the costs and benefits of CSR reporting is greater than ever.
Forthcoming Paths
Increasing worries regarding severe weather phenomena and their effects on people have sparked my interest in ecological accountability. I am presently engaged in two research endeavors in this field.
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.
