Strategic corporate social responsibility can create social, economic value

(Press-News.org) UNIVERSITY PARK, Pa. — Strategic corporate social responsibility (CSR) efforts that are directly related to a hospitality company’s core business operations and competencies can help companies create both social and business value, according to researchers in the Penn State School of Hospitality Management.

Led by Penn State Professor of Hospitality Management Seoki Lee, the research team developed a strategic framework to help hospitality companies optimize their CSR activities — like environmental and social initiatives — to obtain greater social and business value. The researchers published their work in the journal Tourism Economics.

“When it comes to strategic CSR, it is a company’s core business operations and competencies that matter most,” Lee said, pointing to a restaurant participating in food donation programs as an example of strategic CSR matching with a company’s core business operations and competencies. “If a business is participating in CSR activities, those activities must be directly related to the company’s core business operations and competencies. When they do that, they can create not only social value but also business value for the company itself.”

The research team’s strategic CSR framework consists of four components: shared value, enlightened stakeholder theory, resource-based theory and CSR-fit perspective.

Shared value relates to the need for companies to ensure CSR activities create both social and business value, such as a coffee shop working with local farmers to cultivate plants and harvest coffee beans in an environmentally friendly manner. By doing so, the company would add social value through supporting environmentally friendly practices and business value by gaining access to a key product.

Enlightened stakeholder theory centers around a company’s ability to maximize long-term value from strategic CSR. Enlightened stakeholder theory shows that the economic return a business may receive from strategic CSR practices are generally long-term in nature, as it takes time for businesses to inform stakeholders about the benefits of CSR investments and the financial market to understand and recognize the true value of CSR investments, according to Lee.

The final two components of the framework consist of CSR fit and resource-based theory. CSR fit ensures a company's CSR positioning is aligned with its operations or competencies. Resource-based theory demonstrates how strategic CSR can improve a company’s relationship with various stakeholders, such as when CSR engagement improves brand image and thus enhances the company’s relationship with its consumer base.

“Companies must take care of social and environmental issues,” Lee said. “When they know they must tackle those issues, they must ask, ‘What is the best way to do that? What is the best way to create the most value?’ Companies should aim to optimize the social and business value of CSR at the same time.”

To understand perceptions of this strategic CSR framework, the researchers surveyed 310 participants recruited via a Qualtrics panel list. The survey asked participants how they perceived inclusion of business value in CSR and how people perceive CSR activities that relate to a company’s core operations and competencies. Participants were also asked to rate both a restaurant and hotel company on how effective they were in implementing different CSR practices, some of which coincided closely with each respective industry, and others that did not.

Lee said the survey results indicate people perceive CSR to be more effective when a company’s activities strategically relate back to its core operations and competencies, which supports the researchers’ four-component framework.

“Many large corporations may try to do everything or a lot of things, as they have the interests of many stakeholders to take care of,” Lee said. “However, if these corporations focus on a more limited number of CSR activities that are aligned with their core competencies, they can create increased business value while also creating greater social value. Creating business value is equally as important as creating social value because businesses may struggle to continue their CSR efforts if they do not generate economic value in return.”

Penn State doctoral student Samantha Hwang, Minjung Shin of the University of Houston and Kyung Ho Kang of Kyung Hee University collaborated on this research.

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