Impact of Corporate Social Responsibility on Corporate Image and
Identity
ANAND CHOUDHARY
Assistant Professor Human Resource Management Amity
University Patna
Abstract
The current article is a conceptual work exploring the potential impact of corporate social
responsibility (CSR) on corporate image and identity globally. The findings reveal that CSR
has a strong and positive impact on company image as it creates a positive image of the
organisation in the minds of the stakeholders including employees, suppliers, partners,
shareholders, local communities among others. The findings also bring to light that CSR adds
value to the organisation by reducing the cost and risk of doing business, adds to the reputation
of the companies, harnesses greater competitive advantage, and creates a win-win situation for
all stakeholders. The results may have important implications for multinational corporations
(MNCs) operating in developing countries, development agencies including the United Nations
(UN), UNCTAD and researchers working in the field of CSR, stakeholder management,
branding,
Key words: CSR, Corporate Image, Credibility, Stakeholders
Introduction
In today’s fast changing and highly globalised world environment, the image of an organisation
is often central to the organisation’s competitive strategy both for its short and long term future
because it serves as the foundation or basis which directly affects the organisation’s financial
bottomline. Corporate image works by developing credibility in the minds of the customers by
ensuring quality, consistency and security (Werther & Chandler, 2005). On one hand such
credibility ensures that existing customers remain loyal to the brand while customer base
increases, on the other hand the company invests more in research, development of the current
product, advertisement of the product and it’s distribution, with the aim to further strengthen
the company’s brand image and value for customers and to increase the company’s sales and
revenues. However, apart from other things, a company’s image also significantly rests on it’s
value proposition and the perceived image in the eyes of the stakeholders including its
customers and other people. According to Levy (1999), consumers would reward those
companies whom they consider to be socially responsible and who may support and contribute
towards some social cause. However, the stakeholders including the customers and local
communities living where a particular business is based can also punish those firms who are
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considered to be insincere in their efforts with issues which are considered to be socially relevant
or who are found to be indulging in unethical business practices (Sen and Bhattacharya, 2001).
For instance, according to a survey on consumer preference conducted in the United States and
Canada, the majority of the respondents said that they form impression about a particular
brand partly on the basis of the company’s ethics, environmental impact and social
responsibility (Allen & Root, 2004), whilst damage to brand loyalty and company image can
prove to be devastating for any organisation, as happened with Nike which is a world-famous
global brand in the late 1990s1. During 1990s, the company was accused of outsourcing its
manufacturing activities to suppliers in developing countries including Vietnam who were
found to be using child labour in their factories. When the news got out, there was massive
public protests by ordinary citizens in places including New York against the company and
Nike suffered huge losses resulting from tremendous reputational damage at that time. It took
Nike a lot of time and promises made to the people that the company in the coming future would
only choose those suppliers overseas who pledge to follow the same rules and guidelines against
child labour as in the United States2. In addition the company had to work very hard as part of
it’s CSR initiatives to erase those memories from the minds of the people in order to establish
itself again as a global brand commanding respect and credibility. Similarly GAP which is a
famous brand, manufacturing garments had to suffer huge damage to its brandname when it
was found that the company’s suppliers in India were using child labour in ramshackle factories
in Delhi in the year 20073. As a result of those scandals in the past which threatened to tarnish
the companies’ image as well as survival, brand managers today are extra vigilant and remain
on their toes when it comes to protecting their corporate and brand image against any sort of
bad or negative publicity which might hamper their reputation. It’s here that CSR comes in
handy to the managers globally, as those companies who are recognised to be ethical and
responsible corporate citizens by the stakeholders are in a better position to manage risks and
any sort of externalities related to their brand image (Zadek, 2000).
Brand Image and Reputation
In a fast and rapidly changing globalised world, companies are constantly under the lens of
government and environmental bodies, NGOs and multilateral development agencies and have
to work extra hard to protect their brand image and reputation. According to Keller (1993),
“Brand image is the perception about a brand as reflected by the brand association held in
consumer’s memory”. Whilst according to Herzog (1963), Brand Image is “the sum of the total
impressions a consumer receive from many sources”. Following the global economic crisis in
2008, several large business conglomerates were accused by many including the common people
for causing it due to their unscrupulous and unethical business practices, which they argued
resulted in job loss for millions and lifetime savings in banks being wiped out and thereby
1 http://www.nytimes.com/1997/11/08/business/nike-shoe-plant-in-vietnam-is-called-unsafe-forworkers.html
2 http://www.nytimes.com/1998/05/13/business/international-business-nike-pledges-to-end-childlabor-and-apply-us-rules-abroad.html
3https://www.theguardian.com/business/2007/oct/28/ethicalbusiness.india
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causing havoc and innumerable hardships to the lives of millions of those affected. This caused
a lot of resentment in the public against big businesses and fuelled several protest movements
by the people such as “Occupy Wall Street” in different parts of the world (Crane, 2013). It
forced the large MNCs to respond to the challenge which severely threatened to endanger their
brand identity and questioned the very reason for their existence? The MNCs responded to the
challenge by adopting more people-centric policies and initiatives for local communities in
societies where they operate as part of their CSR policy and initiatives, in order to regain their
social acceptance among the people whilst earning their ‘social licence to operate’ as well as to
reestablish their brand’s image and identity.
The Link Between CSR and Protecting Brand Image and Reputation
The concept of CSR has grown significantly in the last few decades since Bowen’s seminal work
entitled “Social Responsibilities of the Businessmen” (1953), which is arguably considered as
the beginning of the modern period of literature on CSR (Carroll, 1999). Since then it has been
the subject of numerous debates, theory building and research among academics, corporates,
governments, NGOs and the people world over. However, despite numerous arguments and
growth in the literature on the subject, no consensus has been achieved till date as to what CSR
means and what it embraces. The idea that businesses have some responsibility towards society
beyond that of making profits for shareholders has been around for centuries (Jenkins, 2005),
however, what those responsibilities might or might not entail have been the focal point of the
debate globally all these years. According to Dahlsrud (2008), who conducted a comparative
analysis of 37 different definitions of CSR, refers to CSR “as a social construction and as such,
its not possible to develop an unbiased definition” (Dahlsrud, 2008, pp. 2). Whilst according to
Matten & Moon (2008), “CSR empirically consists of clearly articulated and communicated
policies and practices of corporations that reflect business responsibility for some of the wider
societal good. Yet the precise manifestation and direction of the responsibility lie at the
discretion of the corporation”. From being considered earlier as a voluntarily activity done by
the companies as part of their social and ethical responsibility (Carroll, 1991, 1979), towards
their stakeholders, today CSR is being viewed by the firms globally as an effective tool not just
for creating goodwill among their stakeholders but also as an insurance against unforeseen and
unpredictable things or events which may have the potential to damage the firm’s brand image
in the future (Muthuri et al, 2012). For instance, “Eighty-one percent of the executives in a 2005
poll stated that corporate responsibility is essential to their business. They disagree about what
exactly ‘corporate responsibility’ means, but the majority believe that business should serve as
a steward in society, and that it has a duty to investors, employees, consumers, communities
and the environment” (Blowfield & Murray 2008, p.10). For a number of reasons, companies
now have to work much harder to protect their reputation and the environment in which they
do business. Scandals such as at Enron and World Com in the past and most recently, the Wall
Street financial scandals have shaken the trust in big business leading to heavy-handed
government regulation. Also the rapidly growing numbers of NGOs stand ready to do battle
with the multinational companies at the slightest sign of misbehaviour. Countless rankings and
ratings put pressure on companies to report on their non-financial performance as well as on
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their financial results, and more than ever, companies are being watched. Embarrassing news
anywhere in the world for example, a child working on an item of clothing with your company’s
trade name on it, can be put on the internet in an instant as happened with companies such as
Nike4 and Gap5 in the past. The growing concern over climate change is also one of the biggest
drivers of growth in the CSR industry of late and companies have had to have a serious look at
their own impact on the environment. In fact, 95% of CEOs surveyed in 2007 by Mckinsey, a
consultancy firm, said that society now has higher expectations of business taking on public
responsibilities than it did five years ago6. Whilst a ‘Business for Social Responsibility’ report
cites a growing body of data – quantitative and qualitative – that shows the bottom line benefits
of socially responsible performance which include: improved financial performance, increased
ability to attract employees, enhanced brand image and improved quality and productivity”7.
According to Zadek (2010), companies increasingly adopt CSR strategies to (1) defend their
reputations (pain alleviation), (2) justify benefits over costs (the ‘traditional’ business case), (3)
integrate with their broader strategies (the ‘strategic’ business case), and (4) learn, innovate
and manage risk (New Economy Business case). Whilst in the words of Kurucz et al. (2008),
companies engage in CSR activities to reduce cost and risk; (2) to gain competitive advantage;
(3) develop reputation and legitimacy and (4) trying to create win–win outcomes through
synergistic value creation for all the stakeholders (as quoted in Carroll & Shabana, 2010). One
of the most famous studies exploring the link between corporate social performance (CSP) and
corporate financial performance (CFP) have been conducted by Margolis & Walsh (2003), who
argued that there is a positive relationship between a firm’s social initiatives and its financial
performance and those companies who are seen as socially responsible brands such as the Tatas
in India or the Marks & Spencer Group in the UK are in a better position in dealing with and
managing any unforeseen risk and externalities related to their business and reputation that
may arise in the future.
Conclusion
From a reputational aspect CSR adds value and credibility to organisations whilst those
organisations who may not adopt CSR practices as part of their company strategy are more
exposed to negative publicity and loss of reputation which can pose a serious threat to their very
existence as happened with companies like Nike, Gap and many others in the past. Thus
although research may not have established a direct link between a firm’s CSP and its
profitability (Geva, 2008), however, not being a responsible corporate citizen is without any
doubt prove to be highly damaging for a company’s reputation and brand value which would
then affect its financial bottomline negatively.
4https://en.wikipedia.org/wiki/Nike_sweatshops
5http://www.telegraph.co.uk/news/worldnews/1567849/Gap-sweatshop-children-saved-in-India-raid.html
6The Economist. London: Jan. 19, 2008, Vol.386, Iss. 8563; p.3
7Leader to Leader, (2007), p. 57
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