Welfare and capital-theoretic foundations of corporate social responsibility and corporate sustainability

Abstract

Corporate social responsibility (CSR) and corporate sustainability (CS) are variously defined in the literature. Providing formal definitions for the two concepts, we show in this article that CS and CSR are distinct but interrelated concepts that can be usefully formalized with capital-theoretic and welfare economic approaches. CSR can particularly constitute a strategy to cope with externalities and serve as insurance against reputational risks that harm profit prospects and corporate value. Moreover, we present a formal approach for integrating the societal perspective of sustainable development with the corporate perspective of CSR and CS. This approach is complementary to a company's internal CSR and CS evaluation.