Corporate social responsibility doesn’t pay

For decades, researchers have asserted that corporate social responsibility is financially worthwhile. A sociologist from the University of Zurich now reveals that this positive correlation between corporate social responsibility and a company’s financial success cannot be taken for granted. Instead, it is fueled by the biased publication of positive results.

When companies strive to do their bit for the environment and social causes as well as make a profit, this is referred to as corporate social responsibility (CSR). For around forty years, researchers all over the world have been studying the impact of CSR on corporate success. The majority of empirical studies conclude that CSR leads to greater financial success. Katja Rost, an UZH professor of sociology, now provides evidence that the positive correlation between CSR and corporate financial success can be traced back to the biased publication of positive results or publication errors.    

CSR also comes at a price

Together with a research colleague, Rost performed a meta-analysis of 162 empirical CSR studies conducted between 1975 and the present day. The two researchers studied the effect of corporate social responsibility on corporate success based on around 2,600 parameters and found evidence that CSR does not improve a company’s financial performance. “This is because CSR doesn’t just bring in profit or improve the firm’s reputation,” explains Rost; “it also carries costs for the company.”

More publication errors in more recent studies

The researchers also wanted to find out which projects are the most prone to publication errors. They discovered that studies containing publication mistakes are more frequent in prestigious journals. Moreover, they are more common in studies that are not based on theoretical foundations, are methodologically weak or use complex, empirical evaluation methods. Publication errors also increasingly appear in studies that fail to discuss the pros and cons of a positive correlation between CSR and corporate financial success. And publication mistakes especially occur in more recent studies, “Because the pressure to publish in academia has risen since the 1990s,” says Rost. 

Furthermore, the researchers replicated two more recent, well-known meta-analyses which confirm that CSR pays off financially. Rost and her research colleague used the data from these meta-analyses and checked them for publication errors. “If you check the meta-analyses for publication mistakes, there is no significant correlation between CSR and corporate financial success,” she summarizes.

Wishful thinking leads to misinformation

The majority of researchers are convinced that companies with social responsibility are also more successful financially. According to Rost, this intellectual stance leads to the selective publication of study results or their manipulation until the desired result is observed. “The selective publication of findings distorts scientific results, leads to the misinformation of the public and may be a trigger for false positive decisions,” concludes Rost. 

Literature:

Katja Rost, Thomas Ehrmann. Reporting Biases in Empirical Management Research: The Example of Win-Win Corporate Social Responsibility. Published online before print February 25, 2015. Business & Society. sagepub.com/journalsPermissions.nav. doi: 10.1177/0007650315572858

null Meta-analysis Katja Rost and Thomas Ehrmann’s meta-analysis of 162 empirical studies examines the financial effect of CSR based on around 2,600 parameters. These studies were conducted between 1975 and the present day, although almost 70 percent were published after 1995. More than 90 percent of the studies were published in journals, the remainder only as working papers. The majority of the studies stem from the field of business studies, a smaller proportion from economics or finance.   null