“CSR, is it for real? Are there any profits in it?”

Abstract: This is a study about why immense amount of resources have been spent on the realm of Corporate Social Responsibility (CSR) by large multinational Swedish firms. A lot of attention has been given to the notion that CSR is vital for a firm’s survival. Stakeholders of all kinds must be taken into account and treated appropriately or there will be severe backlash against the offending firm. Five main dimensions are looked at to see what are at play here so as to understand the motivations of all the CSR related endeavours of most of the firms in the field. The areas of interest are the employees, relationship with the 3rd world, the environment and nature, the practice of philanthropy as well as Codes of Ethics. Are companies pursuing all these CSR activities due to altruism or something more mundane as to the preservation of profits and other trading advantages? What are the effects of various NGOs, government agencies, media and so on when it comes to influencing the actions of these firms? This qualitative analytical piece is backed up with suitable theory and empirical quantitative evidence. A regression model is used based on the inputs of data compiled from the large-cap firms of the Stockholm Stock Exchange. The five dimensions of interest mentioned above are coded numerically to arrive at a dependant variable representing the amount of CSR activities a company engages in. With that and a corresponding profitability measure, a linear regression model can be set up to see if there is any relationship between CSR activity and profit. Using this method I have drawn the tentative conclusion that CSR as an activity for a firm seems to be based upon the need to reduce risk in its arena of doing business and preserving profits and margins. It is also fair to say that there are inconsistencies, confusing messages and a fair amount of decoupling when it comes to practising what they espouse as CSR policies among most firms. Importantly, profits have been shown in this study to be correlated to the amount of CSR activities untaken by companies. This does not mean however that there is exact causality between CSR and profits. There are other economic factors that might explain profits better but CSR is still an important ingredient in the plethora of best practices that companies have to pay attention to in order to stay profitable as well as to retain legitimacy with their stakeholders.