Importance Of Csr

2.2. Importance of CSR

Although previous studies have examined the concept CSR extensively, it is an important element in today’s business and society (Branco & Rodriques, 2006; Rahim, 2011). The original focus of CSR is social responsibility, even though, the component environmental responsibility is more and more added to the overall concept CSR. Environmental responsibility has gained importance, as a result of the changing climate, the increasing population and the scarcity of resources. Dramatic cases, such as BP oil spill and Chernobyl, and external pressure from the media and interest groups have showed the urgency for environmental responsibility and confirmed how important it is to incorporate this element in CSR (Flammer, 2013).

The authors stated that explicit CSR refers to “corporate policies to assume responsibility for the interests of the society” (Matten & Moon, 2008, p. 409). Explicit CSR incorporates voluntary corporate policies, practices and strategies. CSR should, therefore, be implemented by companies based on their own motivation for a better society. Implicit CSR refers to “the entirety of a country’s formal and informal institutions assigning corporations an agreed share of responsibility for society’s interests and concerns” (Matten & Moon, 2008, p. 409). Implicit CSR is based on mandatory requirements for companies to engage in certain CSR practices. Hence, company’s motivation for implicit CSR is often not voluntarily and companies are more obligated through society and governance to engage in CSR. In addition, the authors confirmed that there is a global rise of explicit CSR (Matten & Moon, 2008). The growth of explicit CSR also appears in Europe and this growth is consistent with the view that companies try to achieve a competitive advantage by engaging in CSR and building and maintaining relationships with key

Luo & Bhattacharya (2009) defined CSP as "a company’s overall performance in these diverse corporate prosocial programs in relation to those of its leading competitors in the industry" (Luo & Bhattacharya, 2009, p. 201). In other words, CSP represents stakeholder´s assessment of the overall quality of CSR programs and investments. It can be seen as a proxy for the company´s cumulative, historical involvement in concept CSR. There are various channels through which CSP may be beneficial for company´s stakeholders. These channels might be tangibles assets, such as an increase in sales, or intangible assets, such as increased reputation or customer loyalty, which in the long-run result into better company performance.

To summarize, various reasons for companies to invest in CSR are given by academic studies. Even though several previous studies have examined the concept CSR, it is still an important element in today´s business and society. Stakeholder management and environmental responsibility are crucial elements in the concept CSR. Companies should strive to create market-based assets by making voluntary CSR investments. Subsequently, these CSR investments can create a competitive advantage, which in the long-run enhances shareholder value