Improve Revenue and Reduce Costs Through CSR

Improve Revenue and Reduce Costs Through CSR

Discover six mechanisms by which corporate social responsibility drives a firm's financial performance.
Todd Green August 30, 2010
Managers can increase revenues and reduce costs when they understand the role of Corporate Social Performance (CSP) in driving Corporate Financial Performance (CFP).

The previous 30 years of research on the relationship between CSP and CFP has produced some conflicting results, making the business case for CSR a very controversial area. However, little is understood about the specific processes by which CSR can impact in CFP.

What Elements Drive CSR?

Although previous academic research has focused on aggregate measures of CSP, treating it as an overall score, researchers Francesco Perrini, Angeloantonio Russo, Antonio Tencati, and Clodia Vurro from Bocconi University discuss the individual, underlying drivers of the performance associated with CSR and their ability to improve revenue and reduce costs.

The authors reviewed literature from the past 30 years that examined the link between CSP and CFP resulting in a multi-level framework that focuses on the underlying drivers of the relationship between CSP and CFP.

Six Drivers of CSR

The authors use existing literature on the CSP and CFP link in order to categorize six underlying drivers of CSR performance:

Six Take-aways for Managers

Empirical research could be used to test the relationships between the underlying drivers of CSR-related performance as presented in the theoretical model. Future research could identify the individual drivers most strongly related to positive CSP and CFP. Additionally, future research could identify the contexts in which the revenue-generating and cost-reducing effects are present.
Perrini, F., Russo, A., Tencati, A., and Vurro, C. 2009. Going Beyond a Long-Lasting Debate: What is Behind the Relationship between Corporate Social and Financial Performance? Working paper, SDA Bocconi School of Management.

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