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Procedia - Social and Behavioral Sciences 213 (2015) 503 – 508

20th International Scientific Conference Economics and Management - 2015 (ICEM-2015)

CSR reasons, practices and impact to corporate reputation

0LJOơâRQWDLWơ-3HWNHYLþLHQơa, *
a
Vytautas Magnus University, Kaunas, Lithuania

Abstract

This paper analyses corporate social responsibility in relation to corporate reputation building and management. It provides
theoretical analysis of reasons for corporate social responsibility and main practices of corporate social responsibility in relation
to building good corporate reputation. However, main findings of this paper are related to the examination how corporate social
responsibility activities increases and enhances corporate reputation. This affect is analysed from the perspective of various
stakeholder groups.
©©2015
2015TheTheAuthors.
Authors. Published
Published by Elsevier
by Elsevier Ltd. is an open access article under the CC BY-NC-ND license
Ltd. This
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business.
Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business
Keywords: Corporate social responsibility; Corporate reputation; Corporate reputation management; Stakeholders.

Introduction

In recent time, corporate social responsibility (CSR) has received increasing attention from the corporate world
and became an integral part of the business. Accordingly, CSR has received considerable attention from the
academia as well. The growth of interest on CSR both from practitioners and scholars, in the past decade made CSR
to be a widespread phenomenon. As a result, the majority of organizations introduced CSR into their business
activities and increased the communication through various channels on their CSR activities to stakeholders.
Indeed, nowadays organizations are facing growing expectations from various stakeholder groups. Organizations
attract great attention and pressure on social and environmental issues. Being socially and environmentally
responsible is very important to organizations of all types and sizes. However, organizations must look for ways to
make use of these CSR activities. Thus, translating good causes into strategic benefit of good corporate reputation is
of tremendous value.

* Corresponding author. Tel.: NA

E-mail address: m.sontaite-petkeviciene@evf.vdu.lt

1877-0428 © 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business
doi:10.1016/j.sbspro.2015.11.441
504 Miglė Šontaitė-Petkevičienė / Procedia - Social and Behavioral Sciences 213 (2015) 503 – 508

Literature shows that CSR activities can be translated into good corporate reputation from the perspective of
various stakeholder groups. However, analysis of CSR reasons and practices in relation to building good corporate
reputation and the impact of CSR to corporate reputation still lacks attention. This shows an evident need of
elaboration on such issues as CSR and corporate reputation.
Therefore, the focus of this research is on the main reasons for CSR and main practices of CSR in relation to
building good corporate reputation. Furthermore, main findings of this paper are related to the examination how
CSR activities increases and enhances corporate reputation. This affect is analysed from the perspective of various
stakeholder groups.
The problem of the research – how CSR activities increases and enhances corporate reputation. The object of the
research is CSR in relation to corporate reputation building and management. The objectives of the research are as
follows: (1) to analyse the main reasons of businesses for CSR; (2) to analyse the main practices of CSR in
contemporary business environment; (3) to analyse possible impact of CSR activities to corporate reputation.
This paper presents literature review on corporate reputation as an outcome of CSR activities. In order to solve
the problem of the research at the theoretical level, analysis, generalization and comparison of academic literature
and professional publications is applied in the research. Literature review is based on the most recent articles derived
from the most important management databases under the keywords for the title, abstract and keyword fields of CSR
and corporate reputation. Up to 40 papers matched the search criteria in the selected databases with publication date
and match on both keywords. This confirms that the relationship between CSR and corporate reputation is relatively
new and under-researched.
In this paper, theoretical analysis based on the most outstanding theoretical approaches on the main reasons for
CSR and main practices of CSR in relation to building good corporate reputation is presented. Most importantly,
this section presents an overview of theoretical and empirical papers that explore the relationship between CSR
activities and good corporate reputation. Thus, this paper makes quite a contribution to this rather underdeveloped
area of research.

1. CSR concept

In the discourse on CSR, a wide variety of connotations and definitions exist, ranging from corporate
philanthropic activities to the strategic repositioning of enterprises in society (Nijhof & Jeurissen, 2010). The term
CSR is used to describe how businesses implement the broad societal responsibility of going beyond economic
criteria (Khojastehpour & Johns, 2014). CSR comprises a number of corporate activities that focus on the welfare of
stakeholder groups, including society and the natural environment (Sprinkle & Maines, 2010). Indeed, CSR is a
broad concept that covers a range of environmental, social, and ethical responsibilities, and there have been
numerous definitions in the literature over the years (Polonsky & Jevons, 2009).
Following the European Commission definition, CSR is understood as the voluntary integration of social and
environmental concerns in the enterprises’ daily business operations and in the interaction with their stakeholders
(Benoit-Moreau & Parguel, 2011).
Although many frameworks exist to conceptualize and operationalize CSR, a three dimensional framework
captures the main features of CSR. The three general attitude-based dimensions are: human responsibility;
environmental responsibility; and product responsibility (Anselmsson & Johansson, 2007). As a result, it is now
widely agreed that CSR is a multidimensional concept and CSR initiatives are oriented towards various stakeholder
groups, like: customers, employees, investors, regulators, the community or the environment.
It is evident, that CSR is not about doing business as usual. It is about doing business responsibly in a dynamic
market where many risks and opportunities exist. As in any other business strategy, the success of a CSR strategy
depends on the market dynamics of what competitors do, it depends on whether clients trust your fair trade labels, it
depends on how it affects the loyalty of the employees. Such an approach requires embedding CSR in the entire
business, so people at all levels of the organization are triggered to think, communicate and act on the specific CSR
issues they face in their work (Brown, 2005). CSR is now linked to the social consequences of commerce, business
and marketing and thus aims at mitigating and limiting the negative consequences while enhancing and augmenting
the positive consequences of commerce, business and marketing (Feldman & Vasquez-Parraga, 2013).
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Some corporations start CSR programs to improve their reputation (Zhou, Quan, & Jiang, 2012). Corporate
reputation systematically is understood as subjective and collective recognition, perception, attitude and evaluation
of an organization over time between all involved stakeholder groups that is based on specific organizational quality
aspects, past behaviour, communication, symbolism and, possibility and potential to satisfy future expectations
comparing to competitors. Here, CSR takes very important role.
CSR is an essential element in building and maintaining favourable corporate reputation, which is regarded as an
important strategic resource factoring into a company’s competitive advantage (Park, Lee, & Kim, 2014). Research
by Khojastehpour & Johns (2014) proves that CSR issues may benefit organizations in building their reputation and
suggests that customers expect firms to be involved in CSR activities and may reward them for their efforts.
An interest in CSR and corporate reputation is greatly influenced by tougher competitive conditions in the market
and economic pressure to organizations from various stakeholder groups. Various studies conclude that stakeholder
groups take into account organizations’ commitment to CSR initiatives when evaluating organizations. As a result, it
is important to investigate deeper into CSR reasons, practices and impact to corporate reputation.

2. Main reasons for CSR

Various authors indicate a number of reasons underlying organizations’ motivations for undertaking socially
responsible activities. Sprinkle & Maines (2010) claim that organizations may engage in CSR activities for 4
reasons: organizations may have altruistic intentions; they may use CSR activities as “window dressing” to appease
various stakeholder groups; for potential benefits of recruitment, motivation and retainment of employees; for
customer-related motivations as CSR may entice consumers to buy organization’s products and services.
Weber (2008) indicates five key areas where CSR creates positive relations. This also show 5 reasons for CSR:
positive effect on organization‘s image and reputation; positive effect on employee motivation, retention and
recruitment; cost savings; revenue increases from higher sales and market share; and CSR-related risk reduction or
management. Polonsky & Jevons (2009) found that possible reasons to organizations of being socially responsible
include: improved financial performance; contribution to market value; a more general positive impact on societal
stakeholders; a connection with consumers; and improved product quality. Authors also claim that there are even
internal reasons such as: increased employee commitment and reduced employee turnover; not to mention improved
society overall. In addition, according to Bhattacharya & Sen (2004), CSR activities generate more immediate
outcomes such as word-of-mouth; resilience to negative company information; and consumers’ awareness, attitudes
and attributions about why companies are engaging in CSR initiatives.
Feldman & Vasquez-Parraga (2013) summarizes possible reasons for CSR generated from various literature
sources. They claim that organizations may have 6 reasons for CSR. First, CSR actions influence consumers’
reactions to that company and its products. Second, specific company strategies are found to include CSR actions in
order to attract and retain customers. Third, consumers use trade-off criteria between CSR product features and
traditional product features such as price, quality, convenience and lack of information, corporate brand dominance
or product quality. Fourth, consumers’ evaluations of company CSR may be linked to their perspectives of how
responsible a company is in relevant areas such as economic, legal, ethical, and philanthropic. Fifth, consumers’
evaluations of the fit between companies’ CSR activities and consumers’ characteristics or interests positively affect
consumers’ perceptions of companies’ CSR activities. Sixth, consumers who receive communication about company
CSR activities increase their CSR awareness, which in turn, generates positive attitudes towards buying products
from CSR companies.
All this, in the end, leads to better corporate reputation and better financial performance of the organization. So,
according to Polonsky & Jevons (2009), CSR should not be viewed simplistically as another promotional
opportunity to be leveraged, although some firms do mistakenly try to use CSR in a superficial tactical fashion.

3. Main practices of CSR in contemporary business environment

While there appears to be an agreement that organisations of all types and sizes should behave socially
responsible, the discussion how organisations should develop their CSR activities is quite limited.
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According to Polonsky & Jevons (2009), effective CSR requires extensive and careful investment on the part of
the organization. Organisations not only need to undertake activities in a responsible way, but also need to
understand how their activities are viewed by stakeholders. Nijhof & Jeurissen (2010) argue that to embed CSR in
an organization it is necessary to combine this orientation towards economic constraints with an orientation towards
individual and collective moral values and to integrate these values in corporate decision making. In order to shatter
the glass ceiling, business leaders should reflect on what ethical guidelines they want to hold up in good and bad
times and use this sincere commitment as a foundation for developing business models that are also economically
sustainable.
Polonsky & Jevons (2009) agree that there must be a long-term commitment to CSR activities which must be
supported at senior management level, taking into consideration the issues that are salient to stakeholder groups in
various markets. There also must be resources to support actions and measure performance. These resources are also
required for the development of effective monitoring of corporate activities, changes in stakeholder groups
expectations and changes in the underlying CSR issues. All of this must then be effectively communicated, whether
it be in advertising, annual reports or ongoing stakeholder dialogue.
Carroll (1999) suggests that in order to be socially responsible organisations must consider economic, legal,
ethical and voluntary/philanthropic activities. While, Salmones, Crespo, & Bosque (2005) highlight three
dimensions of CSR: economic, ethical-legal, and philanthropic responsibility. However, according to Epstein
(2008), CSR must concentrate on nine areas: ethics, governance, transparency, business relationships, financial
return, community involvement, product value, employment practices and environmental protection.

4. Impact of CSR activities to corporate reputation

A key aspect of corporate reputation is stakeholder groups’ perceptions of organization’s CSR, or more precisely,
their perceptions of how well the organization’s CSR initiatives and outcomes meet stakeholders’ social and
environmental values and expectations. In this context, CSR has the power to influence these perceptions, thereby
contributing towards maximising the earning potential of corporate reputation (Unerman, 2008).
Literature review proves that CSR and corporate reputation are positively correlated. For example, according to
Husted & Allen (2007), building customers’ and stakeholder groups’ awareness of products, CSR value may affect
the reputation of the organization positively. Bayoud & Kavanagh (2012) agrees that CSR reporting enhances
corporate reputation and financial performance, with the ability to attract foreign investors and, greater customer
satisfaction and employee commitment.
Indeed, research of Husted & Allen (2007) demonstrates that good corporate reputation has a significant potential
for value creation and is difficult to replicate. Corporate reputation is a key competitive advantage in markets where
product differentiation is difficult. According to Melo & Galan (2011), this competitive advantage is strengthened
through the use of CSR.
CSR activities have very important role in what products or services customers choose to purchase. According to
Castaldo et al. (2009), several surveys report that customers are influenced by the CSR activities of the organization.
Moreover, Park, Lee, & Kim (2014) suggest that ethical and philanthropic CSR practices may create and foster
customer beliefs that organization adheres to high ethical standards and cares about society’s wellbeing, which, in
turn, positively impacts consumer assessment of corporate reputation. Lamberti & Lettieri (2009) agree that if
customers become aware of the ethical implications of the organization’s behaviour, they assure that the
organization will maintain certain quality standards and maintain, or improve, its corporate reputation.
Melo & Garrido (2012) supplements to authors by stating that CSR is a heterogeneous construct and that, when
broken down into qualitative areas, each of its dimensions affect corporate reputation differently. A. Perez (2015)
agrees that overall reputational impact of CSR is likely to be jointly contingent upon which CSR dimension is under
consideration. For example, a strong record of environmental performance may influence corporate reputation
differently depending on whether the corporate activities fit with stakeholders’ environmental concerns.
To summarize it must be noted that Perez (2015) points out five theoretical approaches to justify the positive
outcomes of CSR reporting to corporate reputation. Among them, institutional/legitimacy theory and agency theory
are the most common to justify the CSR reporting-reputation link. However, in accordance with impression
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management theory, corporate reputation among its economically powerful stakeholders is a valuable asset that
must be protected and developed.

Conclusions

The results of this paper show that CSR has become one of the most important drivers of corporate reputation.
Research shows that organizations of all types and sizes may strengthen their corporate reputation by engaging in
CSR activities. As a result, CSR has become one of the most important business cases for top managers of
organizations in respect of corporate reputation building. Nowadays the loss of corporate reputation is seen as a
significant factor in encouraging organizations to make investments in CSR.
There are a number of reasons why organizations’ invest in socially responsible activities. Organizations may
engage in CSR activities because of altruistic intentions, positive effect on employee motivation, retention and
recruitment or customer-related motivations, etc. No matter for what reasons organizations invest in CSR, all
reasons lead to better corporate reputation. As a result, organizations shouldn’t treat CSR only as a promotional
opportunity.
While there appears to be an agreement that organisations should behave in socially responsible manner as it has
big influence to corporate reputation, the discussion how organisations should develop their CSR activities is quite
limited. Literature analysis showed that organizations should undertake long-term commitment to CSR activities and
it must be supported at senior management level. On the other hand, CSR activities also must be effectively
communicated through advertising, annual reports or stakeholder dialogue.
It has been found that a key aspect of corporate reputation is stakeholder groups’ perceptions of organization’s
CSR as CSR and corporate reputation are positively correlated. If stakeholder groups become aware of CSR
activities undertaken by the organization, they assure that the organization will maintain or improve its corporate
reputation. However, it should be noted that CSR is a heterogeneous construct and when broken down into
qualitative areas, each of its dimensions affect corporate reputation differently.
In conclusion it should be noted that even though this paper is theoretical by its nature, it is of great value to both
scholars and practitioners as it analyses CSR in relation to corporate reputation management. Results of this
theoretical paper may be useful practically to organizations of all types at the international and national level as it
provides possible reasons and practices of CSR in relation of building good corporate reputation. This paper also
shows how CSR impacts reputation of organizations.

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