2.1 INTRODUCTION
This chapter covers a presentation of
literature that gives additional details to the background of the study. It
starts with a conceptual review of the study. The conceptual review provides a
comprehensive explanation of CSR and captures highlight of works on the
evolution of CSR, dimensions of CSR as well as drivers of CSR. The chapter
continues with the analysis of theories underpinning the work and presents
empirical review of case studies of CSR in both developing and developed
countries. In the end the chapter presents a conceptual framework analysis,
which provides direction for the study.
In
this section the evolution and meaning of CSR, dimensions of CSR, and drivers
of CSR are presented.
Businesses' social obligations have
undergone significant transformations within societal frameworks. Initially,
the conventional view of Corporate Social Responsibility (CSR) emphasized the
importance of businesses aligning their operations with social concerns, even
at the expense of short-term gains (Agudo-Valiente, Garcés-Ayerbe, &
Salvador-Figueras, 2015). Early interpretations of CSR revolved around
companies adhering to societal and regulatory norms (Cholette et al., 2014).
The European Commission broadened this notion by incorporating social and
environmental considerations into corporate strategic planning, defining CSR as
a company's responsibility for its societal impact.
Over time, the ethical dimension of
CSR has waned, with corporate sustainability and social performance taking
precedence in defining CSR (Moura-Leite & Padgett, 2011). Before the 1960s,
CSR discussions primarily centered on corporate philanthropy. However, in the
1960s, the discourse expanded to include the financial implications of CSR. By
the 1970s, thinkers like Friedman (1970) began advocating for the integration
of free-market principles into CSR, emphasizing that social engagement should
serve long-term business interests. Carroll (1979) developed a comprehensive
framework for understanding CSR, highlighting economic, legal, ethical, and
discretionary responsibilities businesses have towards society. In a later
revision, Carroll (1991) replaced "discretionary responsibilities"
with "philanthropic responsibilities," underscoring the economic
aspect as the cornerstone of CSR.
Currently,
the prevailing view of CSR leans towards economic considerations (Calabrese et
al., 2013). This trend is reflected in contemporary literature, which
emphasizes the financial benefits of CSR initiatives. Research on CSR
increasingly focuses on how such initiatives enhance financial performance,
highlighting the need to explore the mechanisms, motivations, and outcomes of
CSR investments (Moura-Leite & Padgett, 2011).
This economic-centric perspective of CSR is pervasive in current discussions
and research. It underscores the importance of businesses sustaining their
operations while simultaneously contributing to societal well-being. Looking
ahead, CSR inquiries will likely center on understanding the intricacies of how
CSR investments translate into financial gains. Key questions revolve around
the methods, motivations, and locations where CSR initiatives can maximize
returns (Moura-Leite & Padgett, 2011).
Overall, the evolution of CSR
reflects a shifting emphasis from purely philanthropic endeavors towards a more
balanced integration of economic, legal, ethical, and societal
responsibilities. This progression is depicted in Carroll's CSR pyramid, which
illustrates the expanding scope of CSR considerations over time (Srichatsuwan,
2014). As businesses navigate the complex landscape of CSR, the enduring
challenge lies in finding the equilibrium between profitability and social
impact, ensuring sustainable success in an ever-changing world.
2.2.2 Challenges of Corporate Social Responsibility
It is worth stressing that there are
two sides of economic responsibility – economic participation on the one hand
and economic dependence on the other (Crane et al., 2008). Economic instability
is one of the major challenges mining undertaking CSR programs and activities
in South Africa faces (Kapelus, 2002). Consequently, as a result of the
regulatory structure that made CSR binding on South African mining firms,
communities have become excessively dependent on companies located within their
surroundings for their economic welfare.
However, as Visser (2010) reiterated,
such mining corporations face the risk of South Africa 's government
sacrificing legal, social or environmental norms with a view to maintaining
their investment, or experiencing immense social disruption if they want to
disinvest from the state economy. Consequently, the government's capacity to
implement CSR activities remains a significant constraint and thus decreases
the efficacy of the legislation as a tool for CSR undertaken by mining
companies.
Lastly, the unions are a significant
driver of CSR in South Africa, especially when it comes to labor law and
working conditions. It is argued that the Unions have an influential voice
(Visser, 2010). Mining companies in South Africa are often faced with
opposition from these Unions in relation to CSR activities they undertake.
These are matters related to employees of mining companies in the areas of
remuneration, health (tackling HIV/AIDS), safety and other social-related
aspects of the lives of workers and their families (Kapelus, 2002).
2.2.3 Benefits of CSR
The
legislative frameworks formulated to enforce the implementation of CSR
activities by companies in both Australia and South Africa coupled with the
clearly outlined approaches for undertaking CSR, has undoubtedly accounted for
the benefits accruing to both countries and companies.
2.2.4 Benefits to Companies
Companies
in Australia and South Africa that undertake CSR activities have generally been
pointed out to have secured benefits from such corporate efforts. According to
literature, CSR benefits to companies in these countries include: Firstly,
companies undertaking CSR activities have been able to strengthen their
reputation and public image by firming up links with the communities they
operate in (Hopkins, 2004; Sayer, 2005). According to Sayer (2005),
"Corporate efforts that benefit society have raised levels of social
participation and generated favourable attitudes towards the public
(communities) and companies, making this social cohesion a key prerequisite for
effective policy and profitable business."
Secondly,
CSR activities have helped boost the financial performance of companies in
South Africa and Australia as a result of the growing public willingness to
make socially responsible investment decisions; and thus, ethical investment
has experienced a recent increase in popularity (Steiner and Steiner, 2006).
According to Hopkins (2004), more than $1 trillion of assets have been invested
in Australia's socially and environmentally responsible portfolios.
In
addition, another benefit in undertaking CSR activities that accrues to
companies in Australia and South Africa, according to Frynas (2005) and Vogel
(2005), is competitive advantage particularly when it comes to vying for
contracts. For instance, Frynas observed that governments have favoured
socially responsible mining companies when awarding oil, gas, minerals, and
other concessions. Also, it is noted that small and medium-sized businesses
that have made a greater commitment to being socially and environmentally
responsible are preferred by foreign investors (French and Wokutch, 2003).
Furthermore,
because of the high costs associated with employee recruitment, Willard
contests that socially responsible firms could save money because they would
face less turnover of staff. Frynas (2005) also noted that CSR could
potentially make employees feel much better about the company they work for,
especially foreigners working for oil companies in developing countries who
witness widespread poverty despite the presence of large wealth generating oil
and gas operations.
2.2.5 Benefits to Society
Although
CSR obviously benefits firms that participate in CSR operations, most CSR
proponents are generally more interested in the benefits that CSR brings to
communities and the environment. These benefits that are outlined below are
what practitioners found in Australia and South Africa.
Firstly,
CSR has helped Australia and South Africa to optimize the Foreign Direct
Investment spill-over effects (Fox et al., 2002). For example, Fox et al.
established that by implementing inward investment policies linked to
CSR-friendly practices within communities or areas of operation and to some
degree national coverage, these countries had ensured that foreign investors
contributed to development through job creation, information and technology
transfer, and provision of infrastructure. Examples of inward investment
policies include technology transfer criteria, local economic linkages, local
community engagement, or public-private partnerships that aim to match
corporate investment with investment in the public sector (Jamali &
Mirshak, 2007).
Secondly,
CSR initiatives by companies have helped to reduce the financial burden of
governments relating to the implementation, monitoring and regulatory
compliance of development programs and projects. CSR has been described as a
form of 'voluntary regulation,' as it requires companies agreeing to meet what
is legally expected of them in terms of social and environmental regulations.
Blowfield and Frynas (2005) argue that "voluntary regulation can be
effective in socio-economic development, promising not least to reduce the
financial regulatory burden on cash-strapped governments and potentially to
free up funds for growth initiatives."
In
addition, CSR advocates argued that CSR has improved communities by enforcing
higher standards of social and environmental efficiency than those needed by
local law. According to Blowfield and Frynas (2005), CSR has been a valuable
step towards reforming national legislation in countries that have struggled to
implement their laws. Furthermore, Sayer (2005) clarified that, as a benefit of
CSR to Australia and South Africa, CSR was an immediate way of reducing the
harm to the environment and the misery caused by the negative social effects of
industry. Hence, these activities were also a method of developing and checking
the criteria, feasible concepts, guidelines and standards which had informed
the regulatory frameworks and mechanisms of these countries.
Lastly,
CSR efforts have become more sophisticated and thus able to make a greater
contribution to growth. CSR programs in Australia to some degree, and in South
Africa in particular, have shifted away from purely philanthropic initiatives
(such as building a plaza or donating medical equipment to a local hospital) to
engaging in long-term sustainability projects. In some cases, philanthropic
donations are still effective ways by which mining firms make meaningful
donations to the communities (Jamali & Mirshak, 2007). On the other hand,
gifts and handouts given directly to the community are now seen as a less
successful way for mining firms to contribute to sustainable development, since
the benefits of this form of philanthropy are general.
2.2.6 Financial Performance
Research in the
field highlights two main ways of assessing financial performance: through
accounting methods and market indicators. Both approaches are widely recognized
in evaluating how well a business is doing economically. Studies have shown
that these two types of measures are distinct and not statistically related,
reflecting different aspects of a company’s financial health (Gentry &
Shen, 2010). Market-based measures, like stock prices, reflect investor
perceptions rather than the intrinsic value of the company, while accounting
returns indicate short-term profitability based on firm-specific factors (Inoue
& Lee, 2011; Richard et al., 2009).
To address the
complexity of financial performance, some researchers have combined accounting
and market measures, aiming to balance risks with operational performance
considerations. These combined measures, such as balanced scorecards, cash flow
per share, and Tobin’s Q, provide insights into intangible assets like
intellectual and human capital (Gunawan, 2007; Richard et al., 2009). Balanced
scorecards offer a multidimensional view of a company's strategy, while Tobin’s
Q compares a firm's market value to its replacement cost, translating into
measurable objectives (Gunawan, 2007; Richard et al., 2009). However, these
composite indices, along with market-based measures, may have limited relevance
for small and medium-sized enterprises (SMEs), as not all SMEs are publicly
listed (Galant & Cadez, 2017).
Researchers investigating
the link between Corporate Social Responsibility (CSR) and financial
performance have used various financial measures, either individually or in
combination, leading to differing outcomes (Galant & Cadez, 2017; Gunawan,
2007; Richard et al., 2009).
This variance in outcomes
partially stems from the diverse methodologies employed by researchers, as well
as the inherent complexities of assessing the relationship between CSR and
financial performance (Galant & Cadez, 2017; Gunawan, 2007; Richard et al.,
2009). While some studies utilize accounting measures to gauge the tangible
impacts of CSR initiatives on profitability, others rely on market indicators
to assess how CSR practices influence investor perceptions and market valuation
of a company (Galant & Cadez, 2017; Gunawan, 2007; Richard et al., 2009).
Moreover, the context in which these
studies are conducted also plays a significant role. For instance, research
focusing on larger, publicly traded companies may heavily emphasize
market-based measures due to their availability and relevance, while studies
centered on SMEs might lean more towards accounting measures, considering the
limited presence of SMEs in stock exchanges (Galant & Cadez, 2017). This
contextual nuance underscores the importance of considering the specific
characteristics and circumstances of the firms being studied when interpreting
the relationship between CSR and financial performance.
2.2.7
Corporate Social Responsibility and Financial Performance Relationship
The relationship between Corporate
Social Responsibility (CSR) and financial performance has been a subject of
considerable discussion in the literature. It's been observed that companies'
economic outcomes are influenced by their level of engagement in social
initiatives, even amidst considerations of stakeholders' interests
(Agudo-Valiente et al., 2015). However, studies exploring this relationship
have yielded mixed findings. Some researchers have found little to no
correlation, or even a negative association, between CSR and financial
performance (Srichatsuwan, 2014; Tsoutsoura, 2004). For instance, Inoue and Lee
(2011) discovered a positive impact of CSR elements like employee relations and
product quality on short-term profitability, but found no significant effect
from community relations and environmental CSR activities. Similarly, Brammer,
Brooks, and Pavelin (2006) concluded that combined measures of social
performance, including environmental and community factors, were inversely
related to stock returns, attributing poor financial performance to strong
social performance.
On the other hand, there is support
for a positive correlation between CSR and financial performance from other
scholars. Mikołajek-Gocejna (2016), after analyzing 53 empirical studies, found
that 71.7% of them indicated a positive relationship. Additionally, Boaventura
et al. (2012) conducted a meta-analysis of 58 empirical articles and observed a
positive association between firms' social performance and financial outcomes,
particularly in environmental and social-based CSR initiatives. These findings
build upon the earlier meta-analysis by Orlitzky, Schmidt, and Rynes (2003),
which also reported an overall positive correlation between CSR and financial
performance, with nuances based on how CSR and financial performance were
defined and measured. A summary of meta-analytical studies on this relationship
Overall, the literature suggests
that, at the very least, engaging in CSR activities can lead to improved
production efficiency and long-term wealth creation, benefiting primary
stakeholders (Galant & Cadez, 2017; Torugsa et al., 2012, 2013).
This discussion underscores the complexity of the CSR-financial performance
relationship and highlights the need for further research. It's important to
consider the nuanced findings of various studies and the diverse factors that
may influence this relationship.
For instance, Galant & Cadez
(2017) emphasize that the impact of CSR on financial performance may vary
depending on the specific context and characteristics of the firms involved.
Similarly, Torugsa et al. (2012, 2013) argue that the effectiveness of CSR
initiatives in driving financial performance hinges on factors such as industry
dynamics, organizational culture, and the extent of stakeholder engagement.
Furthermore, the temporal dimension
of the CSR-financial performance relationship warrants attention. While some
studies focus on short-term impacts, others emphasize the long-term benefits of
CSR engagement (Inoue & Lee, 2011; Brammer, Brooks, & Pavelin, 2006).
This temporal aspect underscores the importance of adopting a holistic
perspective when assessing the relationship between CSR and financial
performance.
In conclusion, while there is
evidence suggesting a positive correlation between CSR and financial
performance, the literature also highlights the complexity and variability of
this relationship. Future research endeavors should continue to explore these
dynamics to provide a more comprehensive understanding of how CSR influences
financial outcomes and contributes to sustainable business practices.
2.3
THEORETICAL REVIEW
This
section of the study examines theories underpinning the work. It examines the
triple bottom line theory, policy thinking model and stakeholder theory.
Generally, these theories unravel factors for the assessment of CSR
performances.
John
Elkington propounded the TBL Theory. The theory became popular among
academicians at the peak the sustainability debate in the mid-2000s (Norman
& MacDonal, 2004). The theory emanates from the expansion of the
environmental perspective in a manner that incorporates the social and economic
characteristics (Elkington, 1997). TBL theory offers a structure for assessing
the contribution of organization environmentally, socially and economically
(Goel, 2010). It is referred to as the practical framework of sustainability
(Rogers and Hudson, 2011).
The theory placed a balanced and
consistent focus on the social, economic and environmental contribution
provided by corporations. The theory’s social contribution implies that
business practices should be conducted fairly and beneficial to labour, human
capital, and the community (Goel, 2010; Elkington, 1997). Examples of these
business practices may include providing health insurance packages and
establishing fair wages. The economic impact of the TBL theory reflects on the
economic benefit offered to the surrounding environment (stakeholders) by a
corporate body in a sustainable manner (Elkington, 1997).
An example of this economic benefit
include livelihood support programmes. The theory’s environmental impact on the
other hand focuses on business practices that do not compromise future
generations' environmental resources. Thus, it reflects on the efficient and
effective use of resources in order to achieve the well-being of present
generations without ignoring forthcoming generations' environmental resources
(Goel, 2010). The motive of TBL agenda is that a corporate body’s success
should be thoroughly assessed by not only the traditional financial
characteristics but also social, economic and environmental impacts of the
firm, which ensure sustainable development.
As
policy study evolved, two rival theoretical positions in the policy scientific
community developed to explain the effective implementation of policy. The
first school of thought perceives that policy-making and implementation are
separate, bounded and sequential (Grindle and Thomas, 1990). It indicates that
the challenge of policy effectiveness centers on gaps including (i)
institutional role and adherence, (ii) financial resource, and (iii) capacity
gap. This approach has been condemned to be biased and one sided (Marume et
al., 2016) because it does not consider the adequacy of CSR policy content as
formulated by institutions or organisations.
Insights changed as it became clear
that the separation of CSR policy formulation from implementation is fatal:
without a sense of direction (Howes et al., 2017). The argument stems from the
fact that CSR policy content has influence on its implementation. For example,
the absence of stakeholder participation, lack of policy sustainability, vague
and ambiguous policy objectives, and lack of implementation and monitoring
arrangement in a formulated CSR policy would have effects on its implementation
and effectiveness (Egonmwan, 2009; Howes et al., 2017). The emergence of the
second school of thought digressed from the former and moved into a direction
of converging policy making and policy implementation as the main borders of
effective policy (Marume et al., 2016). CSR decision-making and CSR policy
execution can be considered to be inextricably related, based on the
preconceptions of the second school of thought approach.
2.3.3 Stakeholder Theory
The
stakeholder theory is widely recognized as one of the most influential
frameworks in discussions surrounding corporate responsibility and
accountability. This theory posits that companies have a fundamental obligation
to consider and address the interests of various groups affected by their
operations, commonly referred to as stakeholders (Friedman and Miles, 2006;
Phillips et al., 2003). According to Friedman and Miles (2006), stakeholders
encompass individuals or entities beyond shareholders who are impacted by the
actions of the firm.
Central
to the stakeholder theory is the notion that organizations have a dual
responsibility: to their shareholders and to the broader spectrum of
stakeholders affected by their activities (Friedman and Miles, 2006; Phillips
et al., 2003). Consequently, businesses are expected to prioritize and manage
the perspectives, needs, and interests of these diverse stakeholder groups.
Henriques and Sadorsky (1999) identified four primary categories of
stakeholders who typically express concerns about the impacts of an
organization's operations: community, regulatory, organizational, and media
stakeholders. In essence, the stakeholder concept mandates organizations to fulfill
their responsibilities towards these four groups, which are prone to expressing
concerns about the organization's activities (Maignan et al., 1999).
However,
despite the significance of the stakeholder theory, it has been subject to
criticism on several fronts. Some scholars argue that the theory may
inadvertently allow for managerial opportunism and lacks clear guidelines and
processes for consistent accounting and decision-making within organizations
(Jensen, 2001). In contrast, Phillips et al. (2003) defend the theory by
offering a broader perspective, suggesting that the presence of multiple
stakeholders actually enhances business accountability and transparency.
English (2000) further supports the stakeholder theory, contending that it
addresses the shortcomings of traditional public participation approaches.
The choice of stakeholder
theory as the adopted theoretical framework for this study is justified by its
comprehensive perspective on the reasons behind companies' engagement in CSR
activities. Stakeholder theory provides insights into the diverse motivations
driving CSR initiatives, ranging from ethical considerations to strategic
business decisions. By focusing on the interests of various stakeholders,
including employees, customers, investors, and communities, stakeholder theory
offers a holistic approach to understanding the role of corporations in
society.
One key strength of
stakeholder theory is its emphasis on inclusive decision-making processes.
Unlike traditional approaches that prioritize the interests of shareholders or
management, stakeholder theory recognizes the importance of considering the
perspectives of all relevant stakeholders. This approach fosters transparency,
accountability, and collaboration, ultimately leading to more effective CSR
strategies.
English (2000) highlights
the relevance of stakeholder theory in environmental risk assessments, where it
addresses the limitations of traditional public participation approaches. By
distinguishing between critical stakeholders and the general public, stakeholder
theory ensures that those most affected by corporate activities have a voice in
decision-making processes. This not only enhances the legitimacy of corporate
actions but also facilitates the identification and mitigation of potential
risks.
Moreover, stakeholder
theory promotes a shift away from adversarial relationships between
corporations and stakeholders towards mutually beneficial partnerships. By
recognizing the interconnectedness of corporate and societal interests,
stakeholder theory encourages corporations to consider the long-term
implications of their actions on stakeholders and vice versa. This fosters a
sense of shared responsibility and promotes sustainable development.
In summary, stakeholder
theory provides a robust framework for understanding the complexities of CSR
effectiveness by considering the interests of all relevant stakeholders. Its
emphasis on inclusive decision-making, collaboration, and mutual benefit makes
it a valuable theoretical lens for analyzing the role of corporations in
promoting social and environmental sustainability.
2.4 EMPIRICAL REVIEW
The
empirical literature examining the relationship between Corporate Social
Responsibility (CSR) and Financial Performance has been abundant and diverse,
with studies employing various methodologies and perspectives to explore this
complex relationship. This review provides a synthesis of key findings and
insights from empirical studies relevant to understanding the interplay between
CSR initiatives and financial outcomes.
One
prominent strand of research has focused on examining the direct impact of CSR
activities on financial performance indicators such as profitability, return on
investment, and stock market performance. For instance, studies by Margolis and
Walsh (2001), Orlitzky et al. (2003), and McWilliams and Siegel (2001) have
found evidence suggesting a positive association between CSR engagement and
financial performance measures. These studies suggest that companies that
actively engage in CSR activities tend to outperform their counterparts in
terms of financial metrics.
Conversely,
there is also a body of literature that challenges the notion of a
straightforward positive relationship between CSR and financial performance.
For example, studies by Aupperle et al. (1985), Griffin and Mahon (1997), and
Waddock and Graves (1997) have reported mixed or inconclusive findings
regarding the impact of CSR on financial performance. Some studies even suggest
a negative relationship between certain dimensions of CSR and financial
outcomes, indicating that excessive CSR spending may detract from profitability
(e.g., Barnett & Salomon, 2006).
Furthermore,
researchers have delved into the moderating and mediating factors that
influence the relationship between CSR and financial performance. For instance,
studies by Brammer and Pavelin (2006) and Luo and Bhattacharya (2006) have
highlighted the role of industry characteristics and corporate governance
mechanisms in shaping the CSR-financial performance relationship. Additionally,
research by Margolis et al. (2007) and Luo and Bhattacharya (2006) has explored
the mediating effects of corporate reputation and customer loyalty on this
relationship.
Moreover,
cross-national studies have provided insights into how institutional factors
and cultural norms influence the CSR-financial performance relationship across
different countries and regions. For instance, studies by Husted and Allen
(2006) and Renneboog et al. (2008) have examined variations in the impact of
CSR on financial performance across developed and developing economies.
Additionally, longitudinal studies have provided valuable insights into the
dynamic nature of the CSR-financial performance relationship over time. For
example, studies by Margolis et al. (2009) and Jo & Harjoto (2011) have
examined how changes in CSR activities and financial performance indicators
evolve over multiple years, shedding light on the long-term impacts of CSR
initiatives on financial outcomes.
Furthermore,
recent research has explored the role of specific CSR practices and initiatives
in driving financial performance. For instance, studies by Flammer (2015) and
Lin et al. (2016) have investigated the effects of environmental sustainability
initiatives on financial performance metrics, while research by Wang &
Sarkis (2013) and Ioannou & Serafeim (2012) has focused on the relationship
between corporate social responsibility and innovation, and its subsequent
impact on financial performance.
Moreover,
there is growing interest in understanding how stakeholder engagement and
stakeholder management practices influence the CSR-financial performance
relationship. Studies by Jones et al. (2007) and Lee et al. (2013) have
explored the effects of stakeholder engagement strategies on financial
performance outcomes, highlighting the importance of effective stakeholder
communication and collaboration in enhancing both CSR and financial
performance.
Overall,
the empirical literature on the relationship between CSR and financial
performance is rich and multifaceted, offering valuable insights for academics,
practitioners, and policymakers alike. By considering the diverse findings and
methodological approaches within this body of literature, researchers can gain
a deeper understanding of the complex interplay between CSR initiatives and
financial outcomes, ultimately contributing to more informed decision-making
and responsible business practices.
In
summary, the empirical literature on the relationship between CSR and financial
performance is characterized by diverse findings and methodological approaches.
While some studies suggest a positive association between CSR engagement and
financial outcomes, others report mixed or inconclusive results. Understanding
the nuances of this relationship requires consideration of contextual factors,
industry dynamics, and mediating mechanisms. Future research should continue to
explore these complexities to provide a more comprehensive understanding of the
impact of CSR on financial performance.
The literature on Corporate Social Responsibility (CSR) and financial
performance highlights a complex relationship with mixed findings. While some
studies suggest a positive correlation between CSR activities and financial
outcomes, others find little to no association or even a negative relationship.
There is a need for further research to address several gaps in the literature.
These include examining contextual factors such as industry type and regulatory
environment, understanding temporal dynamics, exploring different
methodological approaches, incorporating stakeholder perspectives, and
identifying mediating and moderating mechanisms. By addressing these gaps,
scholars can provide valuable insights into how CSR initiatives impact
financial performance, benefiting businesses, policymakers, and other
stakeholders.
Furthermore, research suggests that contextual
factors such as industry type, firm size, and geographical location play a
crucial role in shaping the relationship between CSR and financial performance.
Additionally, understanding the temporal dynamics of this relationship,
including short-term versus long-term effects, is essential for gaining a
comprehensive understanding of its implications. Methodological diversity,
including longitudinal studies and qualitative analyses, can provide a more
nuanced perspective on the complex interplay between CSR activities and
financial outcomes.
Moreover, incorporating stakeholder
perspectives into research designs can offer insights into how CSR initiatives
impact various stakeholders, including employees, customers, investors, and
communities. Identifying mediating and moderating mechanisms that explain the
underlying processes through which CSR influences financial performance, such
as reputation, organizational culture, and strategic alignment, is critical for
developing effective CSR strategies.
Overall, addressing these research
gaps will contribute to a deeper understanding of the CSR-financial performance
relationship and provide valuable guidance for businesses seeking to integrate
CSR into their operations in a meaningful and sustainable manner.
2.6
SUMMARY OF LITERATURE
In general, CSR was introduced in the
literature review as an increasingly prominent discourse in both developed and
developing worlds, particularly among mining companies. From the review it can
be argued that although a clear and enforceable CSR policy is very important,
the presence of key ingredients for effective implementation of CSR policy is
paramount. It can be established that a good policy that is not implemented
well can be parallel to a car without fuel while a good policy without key
ingredients for effective implementation can be liken to a good car with a bad
driver. Everything being equal, once a robust, enforceable and sustainable CSR
policy is implemented, the realisation of development aspirations and financial
performance will follow in the positive direction and CSR policy in the end
will be responsive.
This emphasizes the critical
importance of effective implementation and key ingredients for successful
Corporate Social Responsibility (CSR) policies. While having a well-defined CSR
policy is essential, it's equally crucial to ensure that this policy is implemented
effectively to achieve its intended objectives.
Drawing from the literature, it's
evident that simply having a CSR policy in place is not sufficient; the
presence of key ingredients for effective implementation is paramount. This
notion is particularly relevant in industries such as mining, where CSR discourse
has become increasingly prominent. Using an analogy, one could liken a good CSR
policy that is poorly implemented to a car without fuel – it may have the
potential to drive progress, but without the necessary resources and execution,
it will remain stagnant.
Similarly, a well-implemented CSR
policy lacking essential ingredients for effective execution can be compared to
a good car with a bad driver. Even with the right tools and infrastructure in
place, without competent leadership and strategic direction, the desired
outcomes may not be realized.
Therefore, it can be argued that
achieving the full potential of CSR requires not only the formulation of a
robust, enforceable, and sustainable policy but also the presence of key
ingredients for effective implementation. These ingredients may include dedicated
resources, clear goals and objectives, stakeholder engagement, accountability
mechanisms, and ongoing monitoring and evaluation processes.
Ultimately, when a CSR policy is
successfully implemented with these key ingredients in place, it can lead to
positive outcomes, including the realization of development aspirations and
improved financial performance. Moreover, such a responsive CSR policy can
foster trust, enhance reputation, and contribute to sustainable business
practices, benefiting both the company and its stakeholders in the long run.
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