Does corporate social responsibility affect corporate profit margins?

Abstract

Corporate Social Responsibility (CSR) is increasingly playing a major role in Corporate Business Strategy. Initially, many firms played "lip service" to CSR in trying to be compliant with a new initiative that perceived with being counter to the primary responsibility of having a sustainable business and making adequate returns to the shareholders. Today, CSR has had its profile raised in all major corporate firms and is a major topic not only in firm advertising, but also in the media and boardrooms. For example, recent studies are claiming that the Technology sector is in a unique position to assist corporations using their core competencies in data analytics. While many businesses understand that CSR is the "responsible" thing to do, very few have quantified CSR. CSR needs to be investigated and the only way to do so is to conduct studies on the full impact of this important corporate initiative. This paper analyses the relationship between the major components of CSR and Corporate Financial Performance (CFP). Using a random selection of 100 companies from the Fortune 500, as well as four independent components of CSR, a multiple regression was performed. The four variables were selected from a CSRHub data collection of over 17,000 companies. The final model analyzed the following four independent components of CSR: (1) Community, (2) Employee, (3) Environment, and (4) Governance. The findings show that a linkage exists between firm's profit margin and CSR, with the primary effect coming from the CSR value of employees.