In an effort to attract customers, companies like Amazon and Zoom have been highlighting their corporate social responsibility (CSR) efforts through detailed 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 outcome is encouraging for companies—it shows that the extra sales are being fueled by new clients who are favorably impacted by the firm’s CSR initiatives.
However, the results also revealed challenges.
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?
Surprisingly, we found the opposite. Companies that issued CSR reports appeared to deter new suppliers. This could be because suppliers often shoulder additional costs when a company prioritizes social responsibility.
Depending significantly on suppliers may become expensive for companies. When suppliers notice that a business relies on them, they might prefer cash payments over offering credit. This decrease in credit options can put pressure on a company’s cash flow, resulting in fewer resources available for investment.
Thus, while CSR disclosures can attract customers, they may alienate suppliers—posing a potential downside.
Although earlier studies have shown that CSR disclosures have the potential to increase sales, it was not evident if these sales came from new or current customers. Our research offers insights that can assist in 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.
Although the U.S. does not obligate businesses to publish CSR reports, other countries, including China, do. Starting in 2009, every publicly traded company in China has been required to file yearly CSR reports, which laid the groundwork for our research.
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.
Considering these advancements, the demand for empirical data regarding the advantages and expenses of CSR reporting is more crucial than ever.
Forthcoming Paths
Increasing worries regarding severe weather phenomena and their effects on people have sparked my interest in ecological accountability. I am presently engaged in two research endeavors in this field.
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.
