Establishing Theoretical Foundations and Conceptual Understanding


For any research investigation, literature review holds much importance. It is only through this chapter the researcher can identify gaps in previous studies that have been carried out on similar topics. In the context of the current study, this chapter presents a critical evaluation of these past investigations. The role and importance of the literature review can be understood through fact that it enables readers as well as the researcher to develop a sound theoretical base and gain conceptual understanding about different aspects of the research topic. In this study, the researcher has used literature review as a tool to obtain more understanding and to highlight concepts that are closely related to this research topic.

Rise of CSR Practices


Corporate Social Responsibility (CSR) has emerged to become one of the key points of managing a business enterprise. Many authors consider it as a way through which a company can improve its brand image; while there are some experts who believe that performing such activities can help the company to develop and maintain a healthy relationship with various stakeholders (Sheikh, 2017). Today the function of CSR holds critical importance for businesses, as stated by Höllerer (2013). According to Rahim (2014), CSR is the responsibility of companies that they take upon themselves freely to help communities, societies, people and employees, i.e. all of its stakeholders so that it can develop the image of being a responsible business firm.

Hah & Freeman (2014) contradicted by stating that responsibility towards society is not a new thing for businesses. Enterprises have been performing such activities sine a very long time. In view of Golob (2017) a decision by the Supreme Court in the 19th century America made every business aware that they have to take social responsibility in order to become a ‘good citizen’. This ended the right of the government to cancel the license of an entity if they found that it is irresponsible towards society.

Irresponsible business practices are one of the few reasons that gave birth to the CSR movement. Development of new technologies further aided this aspect, as it allowed people to express their thoughts more freely regarding corrupt business practices adopted by companies and businesses. According to Skarmeas & Constantinos (2013), this turned CSR into a mandatory activity for firms rather than an optional activity. Raynard, Michael, & Royston (2013) stated that before the 19th century, businesses engaged in such activities because they thought they had a responsibility towards society. However, now, with all the modern technologies, companies are being forced to undertake such activities. This is one of the main reasons that explain its declining effectiveness for society. Customers now want to associate with only such organisation that engages in CSR. If the firm does not perform such activities, then they would not buy products or avail services. In a survey conducted by Schneider (2014), 83% of respondents were found to have a similar thought.

On this basis, it may be said that not performing CSR activities could have a jeopardising effect on the very existence of businesses. Moreover, the study by Merk (2014) showed that almost 90% of all the employees feel more fulfilled and become loyal towards the company if they found out that the firm is engaged in some or the other forms of CSR activities. They feel prouder for the company and develop faith in the organisation. According to Nasrullah (2014), modern-day companies consider employee loyalty and satisfaction of paramount importance and thus put more focus on CSR activities. This way, they aim to make the employees loyal towards the workplace and also ensure that they perform to the best of their skills and abilities.

Good CSR strategies have now become a necessity for businesses. Companies that are socially responsible have much higher chances of attaining success and improving their performance. Such firms tend to find it easier to gain the loyalty of the customers, employees and other stakeholders alike (Berkowitz & Marcelo , 2017). Thus, in essence, it can be said that CSR strategies play a great and crucial role in the success of the company as well as its existence in the market. If these are properly used and managed, then they can be a differentiating factor in the overall performance of the organisation.

Since target customers for companies have changed (they are now looking to target the millennials), firms have to engage more in socially responsible activities (Chong, 2017). It is the right thing to do, as said by (Gilberthorpe & Banks, 2012). In the past, it was easier for firms, regardless of their market, to create a strong brand image in the market. However, this has now changed significantly, as the modern-day customers have not only become more demanding, but they also have access to different varieties of information. This means if the firm is not aware of its social responsibilities and is not engaged in such activities, then it could have a severe negative impact on its existence as well as performance. (Costas & Kärreman, 2013) believes, modern technology has the most crucial role to play in the rise in importance of CSR. It is now very easy for the customers to know about social activities and social impact of companies. Therefore, if a firm is not performing on a social level, then it would lead to bad performance and could also result in the ultimate demise of the organisation.

Importance of CSR

Today, CSR has become one of the standard business practices. Höllerer (2013) states it has now become a norm in several industries and companies that do not engage in such practices have a very hard time settling down and performing well. Due to this reason, many times, they are unable to achieve the goals and objectives. In this context, Rahim (2014) rightly stated that CSR activities tend to be directly related to the success and performance of the company. However, Wilkins & Mihaela (2013) raises a question through their study that should companies carry out CSR only to improve their brand image, or they should do it to give back to society. This is a very pertinent question related to CSR and has not been answered properly. Many studies have attempted to answer it but have not been successful. One such study was carried out by Mezzadri (2014). It showed that companies should engage in CSR activities for both purposes, but it did not answer how a firm can achieve this feat. In a similar attempt, Palihawadana & Yeyi (2016) stated that CSR activities should be performed by companies, mainly due to the reason that it is their responsibility to help the society to grow and develop.

Organisations which are seen as less self-with respect to are really supported by clients. It might be mental, yet some way or another individual discover organisations with social responsibility as progressively receptive. Conveying messages about your enterprise's generous frame of mind will do great to plan the open picture as it mirrors a sympathetic side of the organisation (Looser & Walter , 2015). Companies can do that by supporting charitable associations or through gifts. To be in the great books of legislators and government controllers, organisations must present a positive open recognition on its reality about social duty.

This is not simply the most ideal approach to make simpler contacts with government authorities yet, in addition, to keep away from different examinations and tests or even open battles. It winds up simpler to converse with clients or seek after them when you have a fairly decent message to share. At the point when clients get intrigued in the long run in your motivation, they are gradually going to accept the desire of your organisation (Mezzadri, Indian garment clusters and CSR norms: Incompatible agendas at the bottom of the garment commodity chain., 2014). Clearly this is no moving; however, with a little exertion on social responsibility, an organisation arrives at more open in new ways than it may manage without CSR. In like manner, the present age is aggressive, and they are in the steady post for being related with organisations that have a decent open picture and is consistently in the media for its positive choices (Sharif & Kashif , 2014).

Organisations that care about the lives outside the boundaries of their business sort of move and propel representatives to stroll into work every day enthusiastically (Chung & Myeong, 2015). This upgrades the connection between the most elevated administration to the least paid specialists as they proceed to accept that a unified methodology could do ponders. Alongside these there are different favourable circumstances of setting up CSR like holding financial specialists who need to always realise that their assets are being utilised appropriately, making solid association between charitable associations and organisations and uncover the best of their workforce (Susanne & Anne , 2012). With such huge numbers of advantages and a dream to be an organisation that individuals view must be a definitive objective of each enterprise, all things considered.

As the millennial customers’ population increases, it is important that organizations think about their corporate social duty status. Ingraining a model of social responsibility is vital for drawing in what is getting to be one of the biggest market sections (Ismail, 2014). Twenty to thirty-year-olds are especially educated, and they do not mull over exploring an organisation and investigating its moral record and work rehearses. Many feel like it is their responsibility to do their part in making the world a superior spot, and this prospering age does not have any desire to be related with or bolster organisations who do not assume liability for the world and the individuals in it (Pope & Wæraas, 2016).

Several companies ignore their own corporate social responsibility designs by improving the lives of their representatives through sound activities or arranging to raise money occasions to profit nearby philanthropies. Despite the fact that littler in scale, these CSR projects are no less significant and can have an enormously constructive outcome on staff and nearby networks (Lock & Seele, 2016). A basic method to guarantee any CSR exercises are advanced and embraced by however many representatives as could be allowed is to incorporate subtleties of any projects, gathering pledges plans, prosperity activities through the organisation pamphlet. Stay up with the latest on results from any CSR exercises with recordings or smart articles and make a point to send these updates out normally.

Impact of CSR on Financial Performance

CSR activities are treated as an investment and not as an expense or cost where it demonstrates the connection among enterprise and the partners, for example, the clients, investors, employees and society all in all. The business' motivation is not just to win benefit; however, the welfare of the general public too (Torugsa, 2012). A few investigations have demonstrated the positive connection between the CSR and money related execution, while different examinations demonstrate the negative connection between them. Each organisation performs contrastingly for the usage of CSR relying upon various variables like the way of life of the association, size or the partner request. Corporate social responsibility is commonly characterized as while organization is playing out its centre business activities, it considers and handles the impact of these tasks on society, economy and air CSR can be characterized when a firm applies its standards and guidelines, the welfare of its financial specialists and society ought to be considered as its responsibility (Tang, 2012).

Those organisations which give sound condition to their representative will be effective in pulling in new splendid workers and improving responsibility in current workers, which results in higher execution. Various firms are overall contributing gigantic sums on CSR to upgrade its FP (Financial Performance) through holding the present representatives, drawing in new splendid workers, pulling in investors because of the solid picture made by the company's CSR which prompts the better FP (Cavaco & Crifo, 2014). Execution is commonly considered in two different ways of final products and the way to accomplish the outcomes. Various apparatuses are utilised to gauge distinctive kind of exhibitions in firms, for example, directing control (SPC), ABC (Activity-based costing), EVA, MVA, adjusted score, ROI, EPS and aftereffects of NP and vacillations in resources.

The CSR is perpetually on the plan of business association, because of its capacity to upgrade the aggressiveness of a firm. This has propelled scientists to research what influence CSR applies to the primary concern of the business (Uadiale & Temitope , 2012). In this viewpoint, earlier work has displayed dissimilar outcomes. The overwhelming viewpoint accepts that CSR gives a focused edge, which at long last upgrades the money related quality of the business. From an advancement point of view, CSR lessens firm expenses, make an incentive for partners, and speciality interior capacities, for example, being the first mover in an industry. These add to the upper hand of a firm (Höllerer, 2013). The three essential channels through which CSR applies intensity in the firm; participation with a various partner, growing new business openings through tending to key cultural difficulties, improving working conditions, that builds the certainty of labourers and give better consideration towards labourers.

Therefore, by putting resources into unrivalled social responsibility, a firm develops a load of reputational capital and subsequently helps its budgetary presentation. Further, CSR helps in structure the positive association with clients, drawing in the roused worker, bringing down organisations' hazard and spreading positive verbal, which may some way or another force an expense. CSR can advance corporate notoriety and lower money related hazard, along with these lines’ firms having a negligible shot of getting bankrupt, contrasted with non-CSR firms (Cavaco & Crifo, 2014).

Effect on the corporate financial performance of firms' corporate social duty (CSR) will choose their endeavours to back social exercises. If the social exercises influence them contrarily, at that point, the organisations will be increasingly careful about social exercises and may receive a traditionalist methodology concerning issues identifying with those social exercises. In this manner, a reasonable connection between social exercises and money related execution is hugely important to advance usage of CSR in any business organisations, networks and nations (Chung & Myeong, 2015). Corporate social duty oversees notoriety by making a great picture in the brain of clients, providers, and so forth. Partners will imagine that when an organisation is satisfying its social responsibility then how it is conceivable that it will do anything awful for them, so their trust will improve on the organization. Partners trust will affect an organization's productivity and achievement. Along these lines, it is reasoned that corporate social duty has a positive effect on the monetary exhibition of a firm (Golob, 2017).

Relationship between ESG and CSR

ESG (environmental, social and governance) is a term utilised by asset managers and investors to assess corporate behaviour and to decide the future money related performances of organisations. Companies and business colleges invest much energy creating CSR strategies, and it is interesting to see where or if these two abbreviations blend, as expressed by Costas & Kärreman (2013). ESG performance indicators incorporate economic, moral and corporate administration issues, for example, dealing with the organisation's carbon footprint and ensuring there are frameworks set up to guarantee responsibility.

Corporate social responsibility (CSR) is a type of self-guideline guaranteeing an organisation's activities positively affect nature, customers, employees, communities, and the public in general. ESG (Environmental, Social and Governance) alludes to the manners by which organisations consider these measurements in their tasks and the manners by which financial experts think about these measurements in choosing resources for their portfolios (Hah & Freeman, 2014). Two prominent alternative terms for comparative methodologies are: For corporate activities (CSR, Corporate Social Responsibility) and for investing (SRI, an abbreviation utilised for a few expressions — Socially Responsible contributing, Sustainable and Responsible Investing, Sustainable, Responsible and Impact Investing).

The real objectives of the greater part of these contributing methodologies are to progress nicely while doing great. This means the investors need to get both a budgetary return and a positive social result (Chung & Myeong, 2015) The qualities of the contributing methodologies can change a considerable amount from negative screening ways to deal with positive tilt draws near and even ESG energy draws near.

SRI contributing started with a negative screening approach in which speculators discard kinds of firms from their portfolios. For instance, firms that have poor ecological evaluations, firms that have poor practices concerning human rights or every living creature's common sense entitlement, or firms that arrangement in specific items (Chung & Myeong, 2015). Numerous ESG contributing methodologies will, in general, have a positive screening approach in which the financial specialist tilts their portfolio, i.e., more prominent portfolio loads, toward firms that have higher ESG evaluations with lower or no portfolio loads on firms that have low ESG appraisals. ESG contributing is never again a speciality technique, nor is it a procedure dependent on one's inclinations or convictions. Many "customary" institutional speculators are currently utilising ESG systems since they feel that it will enable them to comprehend the dangers of the organisations wherein, they contribute (Cavaco & Crifo, 2014).

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ESG can give experiences into a company's orderly hazard, relative hazard, notoriety chance, suit chance, inventory network chance, defilement chance, estimation chance, drawback (tail) chance, political hazard and atmosphere chance. Conventional institutional financial specialists are additionally beginning ESG reserves, both common assets and ETFs, so as to pull in more youthful speculators, for example, recent college grads who have solid inclinations toward putting resources into high ESG organisations (Berkowitz & Marcelo , 2017).


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