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 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 result is promising for businesses—it indicates that these additional sales are being driven by new customers who are positively influenced by the company’s CSR activities.
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?
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.
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 considered introducing mandatory CSR reporting. Until such requirements are in place, many American companies will likely continue to publish these reports voluntarily.
Considering these advancements, the demand for empirical data regarding the advantages and expenses of CSR reporting is more crucial 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 examining corporations’ public statements to evaluate their environmental risks and the steps they’ve implemented to address these issues. Second, I am exploring how CEO motivations impact corporate environmental statements, initiatives, and expenditures—or the absence of such measures.