The first rudimental examples, of CSR decision framework, come from the Victorian Age, when Firms started to be pushed – with a top-down approach – to mix the self-interest with the BCorporation Ethical approach: the main rationale was the long-term increase of productivity and cognitive proactivity via the design thinking of a better environment.
In the modern era, the inconsistency among time of the US and Europe’s Policies bring to a failure into solving and fixing the main social problems, increasing indirectly the contractual power of Companies – protagonists of the Globalization – that consequently faced a spread in the associations by the consumers of responsibilities and power over social phenomena – calling for a structured CSR.
The CSR framework can be identified as normative for the Business in defining the roots of the Ethical decisions: it is the manifesto of an implicit contract between the society – the enlarged indirect Stakeholder, that generate the positive externalities for the Company’s environment – and the Company itself – that generate real valuable goods and services for the society.
Indirectly, the long term value creation can benefit of the Libertarian Paternalism logic who bring to a better defined community resilience and to a reduction in frictions in optimizing, on average, the individual decisions in the consume choices, also if Friedman criticized that the conventional corporations already satisfy the social duties via the production of better good at lower prices.
But the main CSR’s demand factor it is related to the new multi-lateral communication channels that define an easier C2C and News propagation that increases the correlation between the Community Sentiment level and the Company Expected Market Brand Value, definable as a function of the Sales on its Community.
In fact, Margolis and Walsh found that nearly 100 studies have examined the relationship between CSP and CFP – Corporate Financial Performance -, and most of them point to a positive relation between the two. Consequently, since this relation it is true on average and stronger for larger – and dependent on Brand Awareness – Corporations, the answer it is that there isn’t a standardized strategy that fits all the firms, since each of them it is exposed to different reputational risk.
The main rationale must be defined by the intensity the CSR’s changes bring to:
- (I) a reduction of Expected Legal Risks
- (II) if the customers – especially in B2C – demand this change and
- (III) if the costs increase proportionally to their willingness to pay a price premium.
Those should also bring to a market competitive advantage. To communicate adequately this change, the firm must adopt a credible method of measurement of the results, receiving constant feedback from the Stakeholders on how to implement and define it.
Finally, those Management actions should reflect the company’s Vision and Mission and its intrinsic Values, to produce a genuine proactive long-term commitment that produce positive systematic effects – increasing the Company future decisions credibility.
In the long-term, also, CSR could be seen as a necessity – independently of the correlation with the Brand Awareness – of the company, to prevent complex social phenomena that can affect negatively the competitive environment. For example, the increasing of unemployment because of technological secular changes could affect dangerously the Companies sales and the climate change can increase the prices of goods used in production, reducing margins and consequently compromising the financial sustainability.