Does Corporate Social Responsibility Put Reputation at Risk by Inviting Activist Targeting? An Empirical Test among European SMEs

Abstract

AbstractCorporate social responsibility (CSR) is believed to improve a company's reputation. However, CSR may also put reputation at risk by making the company a more attractive target for activists' campaigns. We test this effect on a sample of 1355 European small and medium‐sized enterprises (SMEs). We find that CSR increases the future probability that an SME's CSR is monitored by local non‐governmental organizations (NGOs) and that this moderates criticism of the SME's CSR. The results imply that SMEs that only halfheartedly implement CSR are more vulnerable to public criticism than SMEs that do not engage in CSR at all. It is advisable that SMEs only position themselves as sustainable companies if their environmental policies have proven to contribute to sustainable development. When initiating stakeholder engagement, SMEs should prevent disappointment by tempering stakeholders' expectations, as NGOs participating in a stakeholder dialogue can use inside information to raise public criticism. © 2017 The Authors. Corporate Social Responsibility and Environmental Management published by ERP Environment and John Wiley & Sons Ltd.