The relationship between CSR activity and sales growth in the UK retailing sector

Abstract

PurposeThis paper aims to examine the relationship between corporate social responsibility (CSR) and sales revenue of two retail companies (Marks & Spencer and Tesco) in the UK to understand how CSR activities can influence retail sales growth. Prior studies have used different theoretical and methodological approaches to report the relationships between CSR and financial performance generally as positive, negative, mixed or neutral, and these are yet to be conclusive.Design/methodology/approachClarifying the existing inconclusive results, the authors deduced donations, community work and environmental responsibility CSR activities from the literature and mapped them out onto sales revenue to formulate conceptual propositions. The authors extracted the corresponding data from the companies’ websites and financial reports, focusing on their 2006-2014 CSR and sales activities, and statistically analysed the longitudinal data with Pearson correlation coefficient.FindingsThe findings revealed positive correlations between donations and sales revenue for the two companies, which suggest that retailers’ philanthropic activities can boost sales levels overtime. Whereas the findings on the community work and the environmental-friendly activities relate either positively or negatively to sales revenue for the companies.Practical implicationsThere is an indication for retail managers to pursue philanthropic activities to effect sales growth. Retailers exhibiting features of Marks & Spencer can commit to community investment to increase revenue over time, whereas those showing features of Tesco can pledge environmental-friendly strategies to influence a stronger correlation between carbon emissions and sales revenue levels.Originality/valueThe outcomes support the extant findings that donations can improve retail sales performance, while community work and the environmental-friendly activities do not necessarily improve sales growth in the retail sector but suggest that retailers can exploit more of the ones that benefit their sales revenue levels. Theoretically, the study supports the stakeholder theory’s influence on firms’ obligation to charitable cause, community investment and environmental-friendly responsibility as CSR activities that make retailers morally responsible to their customers and society in general, whereas the sustainable development model was instrumental in retailers’ CSR activities relating to environmental protection.