Hoping to draw customers, firms from Amazon Down Buzz we’ve got taken praising their good deeds in corporate social responsibility reports.
CSR reports allow firms to spotlight what they’ve done for workers, consumers, communities and the environment – essentially all of their goals beyond simply making a profit. Research shows that CSR statements are interconnected growing sales.
as professor of promotingI believed this raised an interesting query: when firms are successful with CSR disclosures, do they acquire recent customers, or do their additional sales come solely from their existing base?
In recent research several hundred Chinese firms, friend and I put the query to the test. We find that CSR disclosure reduces a firm’s dependence on existing customers by 2.1%.
This is excellent news for firms. This means that additional sales come from recent customers who are literally impressed by the corporate’s CSR activities.
But not all of the conclusions were positive.
To sell more products, firms often have to buy more supplies. A logical follow-up query, then, is: does a company’s disclosure of CSR information lead it to accumulate purchases from recent suppliers?
In fact, we found the alternative. Companies that published CSR information looked as if it would discourage recent suppliers. This is likely because suppliers often incur costs when a company decides to prioritize social responsibility.
Becoming depending on suppliers comes at a cost to businesses. When suppliers know that a company is determined by them, they sometimes demand payment in money fairly than credit. This may harm the corporate since it now has less funds for investments.
While CSR reports impress customers, they appear to antagonize suppliers – and that comes at a cost.
Why it matters
Previous research has shown that CSR disclosures can increase sales, but it surely has long been unclear whether these additional sales come from old or newly acquired customers. Our work provides transparency that firms can use to make decisions.
The findings are also of interest to lawmakers, regulators and corporate responsibility advocates who’re debating whether to make CSR reporting mandatory.
The United States doesn’t require firms to publish CSR reports, but some countries do. One of them is China, which in 2008 ordered all public firms to submit annual CSR reports, starting in 2009. This created the conditions for us to conduct an almost natural experiment.
Interestingly, in keeping with reports from the US Securities and Exchange Commission considered as undertaking some type of corporate social responsibility mandatory reporting. In the absence of necessities, many US corporations will proceed to voluntarily report their CSR.
In other words, the necessity for empirical evidence on the prices and advantages of CSR disclosure is greater than ever.
What’s next?
Increasing occurrence extreme weather phenomena AND weather-related fatalities and injuries piqued my interest in environmental responsibility. I actually have two ongoing research projects.
First, I exploit information publicly reported by the corporate to measure environmental risks and actions taken to cut back them. Second, I examine how CEO incentives influence a firm’s environmental disclosure, actions, and spending—or lack thereof.