Does Corporate Social Responsibility Really Make a Difference? An Explorative Analysis for Chinese Companies

• Author: Hugo Smid,Johan Graafland
• Date: 01 March 2014
• DOI: http://doi.org/10.1111/j.1749-124X.2014.12064.x
• Published date: 01 March 2014

102 China & World Economy / 102–124, Vol. 22, No. 2, 2014

©2014 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Does Corporate Social Responsibility Really

Make a Difference? An Explorative

Analysis for Chinese Companies

Johan Graafland, Hugo Smid*

Abstract

Many studies have been performed to assess the impacts of corporate social responsibility

(CSR) on the financial performance of companies. There are, however, very few studies that

analyze how CSR policies and instruments affect the realization of social and environmental

CSR goals, such as the reduction of workplace accidents or CO2 emissions. Therefore, it

remains uncertain to what extent CSR really contributes to sustainable development and

whether it can serve as an alternative to government regulation to internalize external

effects from market operation. The present study provides an explorative empirical analysis

that aims to fill this gap. We employ regression analysis on a sample of 109 Chinese

companies. The estimation results show that having a code of conduct stimulates the

implementation of other organizational CSR instruments, but CSR implementation only

partly affects the realization of CSR goals. Having codes of conduct without implementing

CSR does not have a significant impact on societal welfare.

Key words: China, corporate social responsibility, environmental impact, social impact,

management system

JEL code: M14

I.Introduction

The world today faces a complex and multi-faceted set of “eco-social questions” because

of the negative external social and environmental effects of production and consumption

*Johan Graafland, Corresponding Author, CentER, Tilburg Sustainability Center, European Banking

Center, Department of Economics/Department of Philosophy, Tilburg, the Netherlands. Email: j.j.

graafland@uvt.nl; Hugo Smid, CentER, Tilburg Sustainability Center, Department of Economics, Tilburg,

the Netherlands. Email: h.smid@uvt.nl.

103

Impact of social responsibility in China

©2014 Institute of World Economics and Politics, Chinese Academy of Social Sciences

patterns. As the regulating power of national and international governments is limited, this

challenge has generated strong interest in integrating the corporate social responsibility

(CSR) of companies into a new governance model, and replacing centralized regulation

with a more collaborative approach (Hess, 2007). Research has shown that internalizing

externalities through CSR is potentially promising, because there is some evidence that the

financial performance of companies (CFP) is positively related to CSR (Orlitzky et al., 2003;

Margolis et al., 2007; Beurden and Gössling, 2008). The causation seems to be that CSR

and CFP mutually affect each other through a virtuous circle: financially successful

companies spend more on CSR because they can afford it, but CSR also helps them to

become more successful in the future (Waddock and Graves, 1997).

Overall, the empirical evidence seems to imply that the market provides companies

incentives to pay attention to CSR and (partly) to internalize external effects. However,

although companies may, therefore, be stimulated to pay attention to CSR, it remains

uncertain whether CSR really reduces negative externalities. Today, increasing numbers of

companies are using various kinds of CSR policies and instruments, such as codes of

conduct, environmental certifications and initiatives, to cooperate with stakeholders. Several

studies have been undertaken to analyze the factors that influence the adoption of these

practices (Aragon-Correa et al., 2004; Williamson et al., 2006; Gadenne et al., 2009; Brown

et al., 2010; Lin and Ho, 2011), but the impact of these programs on the realization of

important social and environmental goals remains unclear. How effective are CSR

instruments? Are they mainly rhetoric instruments? Critical authors like Banerjee (2008)

argue that CSR initiatives are really nothing more than window dressing. Others argue that

whereas the triple bottom line calls on companies to weigh the effects on stakeholders and

the environment alongside profit, in practice companies have co-opted CSR initiatives and

have shifted towards a business ethics agenda that supports rather than questions business

practices, and have only adopted CSR insofar as it can be aligned to strategic interests

(Marens, 2008). As a result, poor social and environmental business practices continue to

be the norm.

There are few studies on the effectiveness of CSR. With respect to environmental

impacts, Friedman and Miles (2001) and Ammenberg and Hjelm (2003) look at the impacts of

environmental management systems and find that the establishment of a joint environmental

management system in Britain and Sweden, respectively, resulted in environmental

improvements. However, both studies are based on a limited number of case studies of

small and medium enterprises (SMEs) and the results are, therefore, difficult to generalize.

Because of this limited evidence, it remains uncertain to what extent the implementation of

a combination of CSR policies and instruments really leads to societal impacts and, therefore,

contributes to societal welfare. This is a very serious gap in the field of CSR research,