To appeal to consumers, enterprises such as Amazon and Zoom have been emphasizing their corporate social responsibility (CSR) initiatives through comprehensive reports.
These reports allow businesses to showcase their initiatives benefiting employees, customers, communities, and the environment—highlighting objectives beyond profit generation. Research indicates that CSR disclosures are linked to increased sales.
As a marketing professor, this correlation prompted a compelling question: Are the additional sales driven by CSR disclosures coming from new customers, or are they simply boosting purchases from the existing customer base?
In a recent study analyzing several hundred Chinese companies, a colleague and I sought to answer this question. Our findings revealed that CSR disclosures reduce a company’s reliance on its existing customers by 2.1%.
This result is promising for businesses—it indicates that these additional sales are being driven by new customers who are positively influenced by the company’s CSR activities.
Nonetheless, the outcomes additionally highlighted difficulties.
In order to boost sales, businesses frequently find it necessary to broaden their supply acquisition. This leads to the following inquiry: Do CSR disclosures aid companies in gaining new suppliers?
To our surprise, we discovered the contrary. Businesses releasing CSR reports seemed to discourage potential suppliers. This may stem from the fact that suppliers frequently bear extra expenses when a business focuses on social responsibility.
Relying heavily on suppliers can become costly for businesses. When suppliers recognize that a company depends on them, they are more likely to demand cash payments instead of extending credit. This reduction in credit availability can strain a company’s cash flow, leaving fewer resources for investment.
Therefore, although revealing CSR activities might draw in clients, it could also drive away suppliers, presenting a possible drawback.
While previous research has established that CSR disclosures can boost sales, it has been unclear whether these sales are sourced from new or existing customers. Our study provides clarity that can guide business decision-making.
This understanding is equally pertinent to legislators, authorities, and supporters of corporate accountability, as they discuss the potential requirement for CSR reporting to be obligatory.
While the U.S. does not require companies to issue CSR reports, other nations, such as China, do. Since 2009, all public companies in China have been mandated to submit annual CSR reports—a requirement that provided the foundation for our study.
Interestingly, the U.S. Securities and Exchange Commission has considered introducing mandatory CSR reporting. Until such requirements are in place, many American companies will likely continue to publish these reports voluntarily.
In light of these developments, the need for empirical evidence on the costs and benefits of CSR reporting is greater than ever.
Future Directions
Growing concerns about extreme weather events and their associated human impacts have piqued my interest in environmental responsibility. I am currently working on two research projects in this area.
First, I am analyzing companies’ public disclosures to assess their environmental risks and the measures they’ve taken to mitigate them. Second, I am investigating how CEO incentives influence corporate environmental disclosures, actions, and spending—or the lack thereof.
