Review Of Literature And Discussion On The Implications Of Corporate Social Responsibility (CSR) On Financial Performance Essay.

Discuss about the Review of the Literature and Discussion.

The main aim of the principles is to ensure the interest of every group of stakeholders involved with the business are being protected. Nevertheless, the principles of CSR are highly associated with the financial performance of a company. There has been several controversies related to the implication of CSR in respect to the finance and accounting policies that are being implemented. The current study will therefore discuss about the existing literature related to CSR principles and the implications of the same in respect to the overall financial performance of a business organisation.

Appropriate research method of collecting secondary data will be implicated, which will ensure that appropriate relevant databases are being used for the same.

After the review of discussion has been concluded it will be possible to identify the existing gaps of the current literature. This will also help to focus upon the need of future research work related to implications of CSR principles in financial performance. 

As the review has been conducted, it will be possible to highlight upon the limitations that will be mentioned in the forms of identified gaps. This will help to ensure that CSR principles can be implicated for the future better development of the financial performance. 

The idea of the corporate social responsibility (CSR) has become widely popular with the global business community in the recent days, which mainly aims to bring about sustainability within the business. It also ensures that the business strategies are able to promote the interest of the society.   In the given context, the current study will aim to discuss upon the literature that discusses about the principles of CSR in context of the accounting and finance services. The relevant ideas about the given topic will be critically analyzed. The existing gaps will also be highlighted. 

The essential step in conducting the literature review is to gather relevant information about the given topic from the previously conducted research work. For this purpose, the relevant databases related to the business research have been used to get the latest and updated information related to the CSR and its impact on the finance and accounting service. Google scholar will be used as the primary search engine databases that will help to explore various relevant journal articles. The key word of “corporate social responsibility”, “finance and accounting management” will be used as the key search terms. The journal articles, which are not peer reviewed will be eliminated. The key ideas related to the topic in each of the chosen articles will be focused as a part literature. 

The principles of CSR have widely affected the future growth of business and its impact value upon the society. According to Ruggie (2017), the principles CSR, focuses upon the sustainable business growth that are able to generate new opportunity for the account service firms. The major components of the CSR are considered to be in line with the audit and assurance service along with the consulting agency that is in line with the finance and accounting industry.

• Theories related to corporate social principles
• Theories related to financial performances

Methodology

Following are the context that are to be proved using the relevant theories related to CSR and relate the same with the financial performance:

• The implications of the CSR principals have positive impact on the financial performance of a business organization.
• The implications of CSR principles can give rise to controversy due to poor levels of financial performance.   

According to the study of Brueckner et al. (2018), the implementation in the principles of CSR are widely getting poplar as it is one of the essential marketing and business ethics tool that are needed to improve the brand value with the society. 93% of the top 250 business corporations publish their annual CSR report that is released for awareness generation of the future generation. This was mainly due to pressures that are generated from the stakeholders to implement business strategies for protecting the needs of the environment. Lin et al. (2017), have added in the context that one of the crucial elements of the CSR principles is due to the fact that it helps the business to establish essential relationship with the society.

There are however, wide spread ideas related to the CSR that are responsible for controversies related to the finance and accounts management. The relationship between the CSR principles and financial performance has been one of the essential topics of business research. From the findings of Nollet et al. (2016), it can be said that business firms, who are able are able to implement better social responsibilities are able to generate high financial performance. This positive relationship between the financial performances and the CSR principles are responsible for high brand value and sustainability. On the other hand Lins et al. (2017), have argued about the fact that high level of linkage between the financial natters and CSR increases the business risks. This is due to the fact that due to the limitations that are imposed by the CSR principles, the companies cannot implement the effective competitive advantage policies. There are additional extra expenses that are needed for the dealing with the social responsibilities and abiding by the business ethical principles.

The Corporate financial performance is believed to have an effective relationship with principles of CSR as it can have a significant impact upon the demand level of stakeholders. The component of financial performance is considered to be an essential element of corporate governance in all business organizations. Flammer(2015), has mentioned that few of the essential corporate responsibilities of business organizations include investment in controlling environmental pollution. This type of investment is believed to have a major impact upon the annual financial performance. Nevertheless, the company is able to generate higher brand value with social responsibility and spreading essential information about the significance of protecting environment from aggressive marketing policies.

The positive relationship between CSR and Corporate financial performance is believed to have greater impact of on higher profit rates that are being generated. There are other opinions related to the relationship between CSR and financial performance, which highlights that there is no positive or negative impact upon the overall company's performance.

It is important to measure the overall performance of corporate social responsibility, which will help to establish relationship with corporate financial performance. Nevertheless this is one of the challenging tasks as currently there is no theoretical consensus and performance scale for perfect measurement of CSR. There are additional challenges due to the multidimensional nature of the CSR principles, which varies from the nature and job profile of the industry. Nevertheless, as mentioned by Saeidi et al. (2015), the social reputation of a company that can be calculated with the help of ethical business values are believed to effective in measuring the success rate of the company in implementing CSR values.

Findings

According to Kanget al.(2016), the content analysis of corporate communication is also one of the major scale for evaluating the value of CSR with respect to particular industry. For this purpose, it is essential to get detailed company information from various groups of stakeholders. This includes the total value of carbon emission that occurred from the manufacturing unit of a company. The total value of the natural resources utilized by the company in a financial year can also help in the matters of evaluation in the effectiveness in CSR implantation. In other words, the companies, which are able to make optimized use of natural resources, are considered to have better ability to implement CSR principles in practice.

According toWang et al. (2015), financial theories can be used in order to define the over line objectives of Corporate responsibility. This will help to ensure that objectives of financial stakeholders are fulfilled. The companies can also be encourage to invest more in social development and philanthropic activities. The business organisations need to understand the ethical principles that are related with people within the community. Better level of cooperation can be available from the society, which will help them to establish better reputation within the customer groups.

Another essential element of corporate social responsibility is looking after the need of the employees within the organisation. As the interest of the employees are protected within the workplace it is possible for the management to get best level of performer’s productivity. The multidimensional nature of CSR can help a business organisation to achieve popularity at every social aspect.

The business principles of McDonald's can be given in the context which will help to understand the importance of multidimensional nature of CSR. Being one of the world's largest fast food chain producer, the McDonald's are famous for four basic principles of CSR. The primary principle is dependent upon sustainable supply chain management. This helps to ensure that the company is purchasing quality raw materials that are needed to ensure proper health for manufactured food. The company also has a specific group of supplier, which provide them with quality raw materials. The company has also set up partnership with environmental defence fund. This help them to reuse or recycle all waste products that are being generated from the manufacturing unit. In order to promote awareness about the nutritional value of the food that are sold, the company provide detailed information about calorific value of every category of food. The company also donate huge amount in charitable society and non-profit organisation in order to ensure better health care and education service are being provided to the deprived section of the society (Palmer 2012).

Due to the increase level of corruption and malpractice in business, the value of the ethical principles are losing its significance in the current business environment. This is resulting in the companies facing huge financial loss as they are losing employees as well as customers. All group of stakeholders are being affected by the malpractices that are being used in modern day business. Due to the limitation of CSR principles, it is often a more issues that are being faced by the business analytics. Rapid rate of increase in demand of consumer product or enforcing business organisation to adapt unethical policies to meet up the requirement in current situation.

Limitations and Implications

All business organisations are aiming to make use of this opportunity in order to improve upon their financial performance. Hence, in the given context it can be said that effective financial performance is inversely related to the practical application of CSR principles. 

Conclusion

From the above conducted literature review, it can be concluded that principles of corporate social responsibility is highly interlinked with the financial performance of a business organisation. Due to the growing competitive advantage policies implemented by multinational corporations, certain group of stakeholders in business are highly getting affected negatively. In order to deal with the same the principles of corporate social responsibility are being implemented in practice. According to most of the business research work, there is a positive relationship between the principles of CSR with that of financial performance of business organisation. Nevertheless, it is also important to note that while business organisations are implementing CSR principles, there is high level of financial risk that are being involved in marketing operations.

In spite of the fact that the existing literature has been able to discuss both the positive and negative impact of relationship between CSR principles with that of financial performance, it has failed to describe the ways to overcome the negative impact and limitations of CSR. Another major gap in existing literature is the fact that proper evidence related to the positive impact of financial performance in implementing CSR principles are not clearly highlighted in the context of all forms of industries. In other words it can be said that the CSR principles that are analysed is not applicable for all type of business environment in modern society. 

In order to improve upon business reputation and deal with the limitation of CSR principles, the future research work need to analyse the financial aspects of business performance. Effective financial strategies also need to be focused as a part of future research work, which will help to ensure that the companies are not facing any form of poor financial performance as they are implementing CSR principles. Hence, the future research work will help to ensure that multinational business corporations are better able to understand the requirement of the society and are able to develop upon the needs of the environment. 

Reference

Brueckner, M., Spencer, R. and Paull, M. eds., 2018. Disciplining the Undisciplined?: Perspectives from Business, Society and Politics on Responsible Citizenship, Corporate Social Responsibility and Sustainability. Springer.

Flammer, C., 2015. Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 61(11), pp.2549-2568.

Kang, C., Germann, F. and Grewal, R., 2016. Washing away your sins? Corporate social responsibility, corporate social irresponsibility, and firm performance. Journal of Marketing, 80(2), pp.59-79.

Lin, W.L., Ho, J.A., Ng, S.I. and Lee, C., 2017. Impact of Positive and Negative Corporate Social Responsibility on Corporate Financial Performance and Idiosyncratic Risk.

Lins, K.V., Servaes, H. and Tamayo, A., 2017. Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. The Journal of Finance, 72(4), pp.1785-1824.

Nollet, J., Filis, G. and Mitrokostas, E., 2016. Corporate social responsibility and financial performance: A non-linear and disaggregated approach. Economic Modelling, 52, pp.400-407.

Palmer, H.J., 2012. Corporate social responsibility and financial performance: Does it pay to be good?.

Ruggie, J.G., 2017. The theory and practice of learning networks: Corporate social responsibility and the Global Compact. In Learning To Talk (pp. 32-42). Routledge.

Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), pp.341-350.

Wang, D.H.M., Chen, P.H., Yu, T.H.K. and Hsiao, C.Y., 2015. The effects of corporate social responsibility on brand equity and firm performance. Journal of business research, 68(11), pp.2232-2236.