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Corporate social responsibility does not lead to financial success

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Posted June 23, 2015

Even though studies of social and economic relations do not get as much attention as technologies, scientists still get quite interesting results from their researches that are worth reading. A sociologist from the University of Zurich has conducted a study that questions long held belief that corporate social responsibility is financially worthwhile.

Corporate social responsibility is thought to help with financial success of the company. However, new study shows that such results may be achieved because of wistful thinking of the scientists and publication errors. Image credit: Danny Choo via Flickr, CC BY-SA 2.0

Corporate social responsibility is thought to help with financial success of the company. However, new study shows that such results may be achieved because of wistful thinking of the scientists and publication errors. Image credit: Danny Choo via Flickr, CC BY-SA 2.0

This study reveals that positive correlation between corporate social responsibility and a company’s financial success cannot be taken for granted, because this belief is mostly fueled by the biased publication of positive results.

Corporate social responsibility is commonly understood as company’s efforts to be environmentally friendly and do its part for social causes. This made a very attractive field for social and economic studies and scientists have been researching corporate social responsibility for over forty years. Majority of these studies have suggested that corporate social responsibility leads to financial success of the company. However, now Professor Katja Rost provides evidence that the positive correlation between corporate social responsibility and corporate financial success can be traced back to the biased publication of positive results or even publication errors.

Researcher with his colleagues performed a meta-analysis of 162 empirical studies of corporate social responsibility, conducted between 1975 and the present day. Scientists paid attention to around 2,600 parameters and found evidence that corporate social responsibility does not improve a company’s financial performance. Katja Rost explained that “This is because corporate social responsibility doesn’t just bring in profit or improve the firm’s reputation, it also carries costs for the company.”

Having stated that, scientists also wanted to understand which projects are the most prone to publication errors. Surprisingly, they found that studies containing publication mistakes are more frequent in prestigious journals. Furthermore, such mistakes are more common in works that do not have theoretical foundations and are methodologically weak or use complex, empirical evaluation methods.

Such publication errors increasingly appear in studies that fail to discuss the pros and cons of a positive correlation between corporate social responsibility and corporate financial success. Scientists also found that publication errors are more common in recent studies and they think it is because there is pressure in academia to publish such positive results discussing corporate social responsibility.

To check their results, scientists have replicated two more recent, well-known meta-analyses which confirm that corporate social responsibility pays off financially. Researchers took data from these studies and checked them for publication errors and found that there actually is no significant correlation between corporate social responsibility and corporate financial success. Scientists say that such results are often achieved because of wistful thinking.

Majority of scientists that have researched the corporate social responsibility were convinced that companies with social responsibility are also more successful financially even before they conducted their studies.

Katja Rost says that such biased attitude leads to the selective publication of study results or their manipulation until the desired result is observed. This, in turn, leads to distortion of the scientific discourse in the field, provides misleading information to society and can even cause poorly judged decisions based on this information. It also shows that science has to maintain an objective intellectual stance as much as it is possible, even if final results are not the ones society wants to hear.

Source: uzh.ch

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