Organizational Performance and the Impact of Corporate Social Responsibility

There exists an enormous body of literature that purports to examine how corporate social responsibility (CSR) has enhanced the performance of organizations in the past two decades. Waddock explained CSR as the strategies and practices a company develops in an attempt to create relationships with its stakeholders (both internal and external stakeholders) and the natural environment. This is because the actions of stakeholders can impact the performance of an organization in a positive or negative manner. As a result, organizations are now encouraged to implement and carry out CSR activities in the society in which they operate with the aim of enhancing their performance.

The issue of CSR has been of growing interest and has not only been supported by developed and developing countries but also by multinational and international organizations as well as companies themselves. According to various sources, CSR has brought both social advantages as well as a lot of merits to companies in general. For instance, the successful implementation of CSR activities has aided businesses in building a strong corporate image and reputation, hence effectively improving the performance of firms. This affirms a study that business organisations that often engage in CSR activities as part of their operations stand a huge chance of earning more trust from stakeholders hence translating into higher returns for such a firm as compared to a firm with lower or no engagement of CSR activities. This is because as the organization engages in CSR initiatives, the trust of its stakeholders, particularly, the customers is gained. As the trust of the customers grows, their loyalty to purchase the products and services of the organization is likely to increase which subsequently translates into higher returns for the firm.

Many organizations across the world, be it organizations in developed and developing countries, are beginning to effectively manage their CSR activities with all kinds of seriousness. The existing literature on the subject matter tends to encourage businesses to undertake corporate social responsibility activities as it tends to enhance organizational performance both in the short and long run. Some scholars believed otherwise. They assessed how the disclosure of CSR activities enhanced the performance of firms. They found that the disclosure of CSR activities in the short run does not enhance the performance of firms. Similarly, other scholars have provided contrary opinions about the effectiveness of CSR in improving organizational performance. They posit that CSR is a deviation from the core mandate of the business which is to make profit for its owners. They further argue that CSR is a waste of scarce organizational resources and will erode the economic power of the organization. However, similar studies on the subject matter by other scholars have established that CSR has a negative impact on organizational performance. They have all affirmed that the external CSR actions and initiatives of an organization enhance the market value of the business in a negative manner