Corporate Social Responsibility, Financial Materiality, and the Challenges of Forced Migration

Abstract

Forced migration is a critical social challenge of our time. Corporate responses to social challenges of this magnitude have inspired a growing body of literature in management and strategy. In particular, prior work has investigated companies’ responses based on specific CSR policies with high financial materiality––e.g., energy firms’ policy commitments to climate change mitigation. However, the literature has yet to understand whether and how exposure to a social challenge influences the composition of a firm’s portfolio of CSR policies, comprising both more and less financially material actions and distinct social dimensions. To address this question, this paper studies the challenges of forced migration to Europe. We propose a novel empirical strategy leveraging headquarter proximity to tragic refugee incidents as a source of variation in the salience of forced migration as perceived by companies. Employing a phenomenological approach, we show that firms more exposed to forced migration adjust their portfolios of social CSR policies by progressively increasing the adoption of less material policies, vis-à-vis more material actions. In line with the argument that firms may see such responses as a means to strengthen their ties to nonfinancial stakeholders, we then show that responses are driven by firms with higher pre-existing social performance who, according to the literature, are more prone to use CSR to manage stakeholder relationships. Finally, we also show that firms’ responses are concentrated on dimensions related to employees and communities. Our paper contributes to literatures on corporate responses to social challenges, strategic CSR, and financial materiality.