The Concept of CSR
Title: A Proposal On The Impact Of CSR On The Firm’s Performance: A Case Of Publically Listed Firms In Uk.
As a field of study, corporate social responsibility (CSR) has grown rapidly since its inception. There has been an increase in the prominence of the concept of CSR as a means of improving an employee's work performance. It creates standards of behaviour that companies should adhere to so that they may make an influence on society that is both positive and effective. There is strong empirical evidence that CSR efforts have a positive impact on the market. CSR initiatives may have a positive influence on customer happiness, staff satisfaction, increased brand equity, and favourable opinions toward companies. These relational advantages, in turn, boost corporate reputation and financial success. The word "social responsibility" refers to a company's efforts to conduct its business in a manner that is ethical, socially responsible, and helpful to the community as a whole. When it comes to ensuring the long-term well-being of its stakeholders, a company is obligated to practise corporate social responsibility (CSR). Because of the social and environmental consequences of company actions, CSR has become a fundamental aspect of business strategy for many firms (Khan, et. al., 2021).
Despite the fact that many companies engage in CSR, there are still others who believe that the spheres of society and the environment belong solely within the economic sphere (Berete, 2011). There Studies suggest that the more the firms are socially responsible the greater the companies are. It is also because investors and stakeholders expect that companies become more socially and ecologically conscious. To attract these stakeholders, top management finds itself under a lot of pressure to implement CSR. The link between social welfare and corporate profitability is a topic that has been the subject of research in the field of social responsibility on a regular basis. Competitive advantage may be gained by using CSR process skills that support a company's strategic goals to achieve both economic and social advantages (Baraibar-Diez, and D Odriozola, 2019).
The key aim of the study is to critically analyse the impact of Corporate social responsibility as taken by the enterprises on the overall profitability of the firm at large.
The key objectives of the study can be identified as follows:
1.To assess how the corporate social responsibility is engaged in by the enterprises through annual reports.
2.To understand the impact of the CSR on the overall profitability of the enterprise.
3.To provide recommendations based on which the firm can improve its performance.
- What is the impact of the CSR on the overall profitability of the enterprise?
H1=The corporate social responsibility impacts profitability of the business.
X1= The total asset control influences the firm’s profitability
X2=A company’s size influences profitability
X3=The women on board influences profitability
X4=A firm’s reputation influences profitability
H0= The corporate social responsibility does not impact profitability of the business
Corporate Social Responsibility
The phrase CSR refers to a company's commitment to maximising its benefits to stakeholders while minimising its harm to society at large. The World Bank defines CSR as a company's commitment to contributing to national economic advancement by engaging with workers, their families, the local region, and community in ways that are both advantageous to the firm and helpful for development. A current societal ethical, legal, economic, and social standard must be adhered to for successful organization, a company must alter all of its activities," (Limones, 2020). In order to popularise the concept of socially responsible behaviour, policymakers and other stakeholder representatives have taken many measures.
Factors Influencing Firm Profitability and Performance
Furthermore, CSR has been described by Bai and Chang (2015) to mean a method or framework for dealing with businesses' social responsibilities, which includes laying out the criteria that companies must meet in order not to harm the environment or their local communities in any way, as well as refraining from pursuing profit at any cost. When it comes to CSR, the term covers a wide range of activities, including but not limited to philanthropy, the availability and accessibility of education, and healthcare. CSR also includes implementing activities and processes that help reduce or eliminate the negative impacts on people and the environment, most notably the manufacturing methods and energy consumption of a company's products, which contribute to the production of greenhouse gases (Kuo, et. al., 2012). It has been made mandatory or regulated to reduce the environmental effect of certain processes. Furthermore, according to Trendafilova et al. (2013), corporate social responsibility (CSR) Companies are encouraged to follow the norms and international guidelines in order to reduce emissions and conserve the earth for future generations, despite the fact that this is not a legal obligation but rather an ethical, moral, and social commitment that all enterprises must comply with. CSR is the future of the growth and success of any organisation and its compliance should be equally important for the businesses as other things are.
The firm's performance may be seen as either favourable or poor, depending on the context and environment in which it operates. The improved customer service, higher value, and reputation of the company in the market may also have an impact on the company's success. To significance to the above context, Saeidi et al. (2015) indicate that companies that make strategic investments in corporate social responsibility to improve the circumstances of local schools and the general welfare of the community might achieve increased financial performance. According to Inoue and Lee, a company's market value and financial success are strongly correlated with customer satisfaction with its performance (2011). This is because corporate social responsibility (CSR) has a favourable impact on a company's market price, goodwill, and financial performance. As a result, executives are recommended to engage in long-term corporate social responsibility activities in order to acquire a competitive advantage in the market. Depending on the sector, the impact of CSR on an organization's performance may vary, and stakeholders expect companies of all sizes to exhibit a commitment to CSR. According to Theodoulidis et al. (2017), A strategic competitive advantage may be gained by companies that are able to address the requirements of their stakeholders. According to Stuebs and Sun (2011), socially responsible business practises (CSR) may help companies improve their market reputation, and that huge corporations that face severe crises or scandals can utilise CSR as a long-term strategic investment to improve their public image. Firms may better respond to environmental concerns by working with a wide range of environmental authorities, non-governmental companies, and other relevant players, as claimed by Zhu, et. al. (2014), and this has a beneficial effect on the company's image in the market.
Ali et al (2010) make a similar argument in the modern literature, stating the importance of intangible resources and employees' participation and cooperation as immaterial assets of the organisation to attaining competitive advantage. A company's intangible assets can be a significant source of competitive advantage, according to Ali et al. (2010) the organisation in many situations. Since a result, active participation in CSR may promote employee loyalty and commitment, as employees are more likely to cooperate and collaborate with one another, which in turn increases the firm's overall productivity. Consequently, organisations that are involved in social responsibility can benefit from enhanced cooperation and teamwork, as well as increased employee dedication, which can result in improved performance for the company.
CSR and corporate performance have been examined in a variety of ways. Hossein, et al (2012) attempted to clarify the relationship between CSR and economic performance of the organisation; in this study, the author investigated both the positive and negative impacts of CSR activities on the business performance of numerous industries, including airline, restaurants, and hotels. The study's findings showed that CSR had a mixed effect on the restaurant and airline industries, but that it had a favourable effect on the hotel business but was not substantial. CSR's influence on company performance may thus vary by industry, and the primary reason for this might be disclosure of CSR efforts to all other stakeholders, including consumers and the general public. As Skare and Golja (2012) examined the link between corporate social responsibility (CSR) and financial performance, the authors discovered that companies that participate in CSR activities have superior financial success than those that do not. To put it another way, when companies engage in corporate social responsibility activities, their reputation in the market rises, and customers and other stakeholders see the company as more responsible. This results in a stronger relationship and emotional attachment with the company, according to Saeidi et al. (2015). As a result, the company's financial performance also increases. However, it is imperative that the company properly discloses and contributes directly to CSR initiatives that have a good impact on The environment as well as civilization Similarly, Gautam, et al. (2016) conducted an empirical study in India to examine the relationship between corporate social responsibility (CSR) disclosure and financial success. Regression modelling was used to analyse the impact of Risk disclosure on a company's financial performance. 'They discovered that CSR disclosure had a beneficial impact on firm performance, which supports the thesis made by Beck, et al (2018) that CSR disclosure is necessary to leverage the investment in CSR. In part, this is because CSR involvement tends to be incredibly beneficial to the brand, since it enhances the level of openness. A favourable correlation between CSR and profitability has been observed, however this correlation may be different depending on the specific industry. As a result, it is clear that the company's financial success may be predicted to some extent using the CSR investment.
Moreover, research undertaken by Basuony et al. (2014) intended to analyse the influence of CSR initiatives on the performance of a firm in the setting of Egypt. To conduct this research, CSR has been shown to improve a company's financial and legal standing as well as its operational efficiency in surveys done by the author. Larger and older companies have more of an impact on their organisations' performance when they participate in CSR activities, according to a new research study.
Results and Analysis
According to Alshammari (2015), another study sought to determine the impact of corporate social responsibility (CSR) on financial performance, as well as the role reputation plays and institutional investors play. The researchers conducted a survey in order to get relevant information. As a result of the study, a favourable relationship between CSR and corporate performance was discovered in the study, but it was also shown that for the CSR efforts to be most effective, the organization's reputation among stakeholders must be maintained. At the same time, the existence of institutional ownership has been shown to favourably reduce the impact of corporate social responsibility on the performance of a company's stock. As a result, enterprises with a higher level of institutional ownership can potentially reap the benefits of CSR operations to a significant extent.
There are many more stakeholders in a company than only shareholders and their finances, according to the stakeholder theory, which is the most frequently acknowledged view. It is essential for a company to manage its interactions with a diverse variety of stakeholders involved that either affect or are affected by its business operations in order to prosper. As a result, the term stakeholder refers to ". people or groups of people who own, or claim to own, a company and its processes, whether they own them now or in the past, present or future." The question of "who can influence or be impacted by" is a significant one in this situation since it includes a wide range of social groups and the ways in which their activities may influence corporations or the ways in which they may be influenced by actions taken by the organisation. Enterprises' tasks, structures, and activities are examined and described in the theory. Stakeholder involvement is also examined as a means of enhancing the performance of the community as a whole (Mohamed et al., 2013). Activists, advocacy groups, civil society groups, and social movements are examples of "secondary stakeholders," according to this theory, who are not directly involved in the production or utilisation of the goods (Russo and Perrini, 2010). Arguments have been raised against this form of stakeholder since they do not have any legal control over the companies and hence should not be classified as stakeholders. There are really three stakeholder - oriented approaches: instrumental, normative, and explanatory. Using a method to find is the most common (Basuony et al., 2014). Moral obligation of the company to its stakeholders and, in certain situations, the entire purpose of corporations is at the heart of this approach. When it comes to strategic management, the instrumental and descriptive theories propose that organisations should identify significant stakeholders as being in the business's self-interest by recognising them as being in the business's own self-interest. When stakeholders are identified or assessed based on their legitimacy, power, and urgency, there is a combination of normative and instrumental approaches.
The research study is qualitative in nature and the data will be collected through secondary sources for which the annual report of 10 firms will be chosen and evaluated to examine the overall profitability and success of the business and the role of CSR in the same. A small number of participants necessitates the use of qualitative research methodology in order to get non-numerical and observational data. When it comes to presenting specifics about the project manager's responsibilities, this approach works well. Qualitative methods allow people to communicate their thoughts, feelings, and experiences (Tomaszewski, et. al, 2020). In addition, this study employs a descriptive research approach, which is appropriate for qualitative research design. (Swedberg, 2020).
Realism, positivism, and interpretivism are only few of the research philosophies that exist. Using realism research philosophy focuses on the idea that authenticity is independent of human senses in this case. On the basis of a scientific approach to knowledge establishment, this method is used. Using positivist research philosophy, on the other hand, is based on a factual perspective that relies on the reliability of data through measurement. As a result, it doesn't rely solely on the findings of scientists. Furthermore, a third philosophy is called interpretivism (Mertens, 2019). In this study, this procedure is likewise accurate, although measurements are not the emphasis. The researcher also plans to employ a deductive strategy in this study, and this method does not work well with that approach.
This is why the researcher has chosen positivism as a research philosophy since it has a factual perspective that relies on the reliability of measurements and to prove the hypothesis. Because it incorporates scientific answers, it is less concerned with observations. CSR's influence in improving a company's financial performance has been examined using this style of research.
The proposed research method is the collection of secondary data via the annual reports of 10 chosen firms. The firms would be varying in size and industry and the way in which the firm performs alongside the overall profitability over the last few years would be assessed critically.
In regard to the qualitative analysis , thematic analysis is the key technique which shall be opted for. Here themes related to the impact of CSR on a firm’s profitability alongside , impact of women on board, a firm’s reputation and other related factors would be engaged in to identify the key manner in which the profitability of the firm is impacted for the firms
The collection of data is the first step in writing a research paper, and it is the technique that is most important since it assists in collecting information from many sources. There are two sorts of data gathering procedures in this case: primary and secondary data collection (Patten & Newhart, 2017).
After carefully considering the methodologies and procedures described above, the researcher chose a secondary data collection approach, which involves gathering and synthesising information from organisations through their annual reports, for the purposes of this study. The application of case study methodology aids in the collection of thorough replies from the participating firms, which aids in the comprehensive understanding of the research subject. However, while the main data collecting approach is beneficial, the study cannot obtain up-to-date information from the participants because of the nature of the research. Therefore, secondary data collection techniques are employed (Patten & Newhart, 2017).
This research makes use of non-numerical information, which includes observational data that has been obtained via the analysis of the company's current position, for its findings.
It is critical for the study's efficacy to take into account ethical considerations when writing the research paper. As the researcher is using secondary data collection method for this study and will source the annual report of the companies, the researcher will duly site the documents used and will ensure the credit of the collected data so no ethical breach will be encountered.
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