The Economic Impact of Corporate Social Responsibility

Subsumed under the umbrella term Corporate Social Responsibility (CSR), the assumed duties of business in society have been an increasingly debated topic in academic research,1 business practice,2 politics3 and media.4 Especially within the scientific discussion, two contradicting positions can be distinguished: on the one hand, there is the argument that resources spent on other than economic goals are an illegitimate waste of resources, because they are contradictory to a firm's responsibility to its shareholders and therefore even to the very function of business in modern societies.5 On the other hand, proponents of CSR try to champion their idea by emphasising the so-called business case for CSR. Arguing that CSR can come along with certain benefits that might outweigh its costs, they see CSR engagement as a necessity for business, not least for the sake of its own economic interest.

This notion is of particular importance, because if CSR and profit maximising interests could indeed be shown to go hand in hand, two conflicts could be resolved. First, on a conceptual level, (economists') arguments against CSR as an illegitimate expenditure would lose their basis and two conflicting positions would eventually be united. Second, managers in practice could justify CSR expenses to the shareholders not only due to their moral quality but also with reference to their economic benefits. Similarly, investors would not have to worry about a trade-off between their hope for a maximum return on their investment on the one hand, and their ethical considerations on the other. However, as long as this parallelism of societal engagement and private business interests lacks empirical support, it risks corresponding to its advocates' wishful thinking rather than to a reliable fact that can serve as the ground for management decisions. Consequently, a profound understanding of CSR's economic impacts is highly relevant to both academic debate as well as practice.