The idea that businesses must provide societal benefits for the communities they serve in addition to generating shareholder wealth, is now considered less a differentiation of a company’s strategy and more a requirement. Corporate Social Responsibility, or CSR, refers to strategies a firm takes to ensure its operations are ethical and beneficial for society. However, many stakeholders now expect firms to demonstrate their values through public support for or against one side of a partisan sociopolitical issue, also called corporate sociopolitical activism, or Corporate Social Activism (CSA).

CSR vs. CSA – What’s the difference?

CSA is when a firm advocates for government policy change on social and moral issues. CSR goals are widely accepted as inherently universal truths involving ethics and morality, whereas CSA goals are often polarizing by supporting one ideology over another. See the table below for some real-life examples illustrating the difference between CSR and CSA.

CSA and Firm Value

CSA has the potential to both strengthen and sever stakeholder relationships, thus making its impact for a firm uncertain. For managers considering engaging in CSA, here are several key insights from a recent study in the Journal of Marketing:

1. Managers should pay close attention to how greatly their stance deviates from their stakeholders’ (customers, employees, legislature) values:

   • Higher deviation elicits stronger negative reactions from investors.

   • Close alignment elicits a positive investor response.

2. CSA that is aligned with customers can help managers avoid an adverse stock market reaction and elicit positive future sales growth:

   • Regardless of deviation from employees and state legislators, when CSA is aligned with customers, managers can expect positive sales growth over the next quarter and year.

   • With at least one other stakeholder group, managers can expect positive sales growth without an adverse stock market reaction.

   • Customers continue to reward or punish firms long after CSA is implemented.

3. CSA influences investors’ inferences about the firm’s commitment to activism versus its fiduciary duties:

   • Managers should be aware that they will receive a heightened response from investors when their activism takes the form of actions, is announced by the CEO, is not justified by a business objective, and is announced alone (vs. in a coalition with other firms).

   • If managers are deeply committed to activism and it aligns with their strategic objectives (i.e., acquiring a more liberal or conservative customer base), activism’s potential benefits may be worth an intensified negative response from investors.

   • If managers are uncertain about activism’s role in their firm’s future strategic priorities or they are sensitive to investor responses, they should choose a more moderate approach to engaging in CSA.

Bandwagon Activism

Showing solidarity with your customers by taking a stand on social activism and social movements makes sense. That said, unless your efforts are genuine and authentic, and your firm is committed to lasting and meaningful change, bandwagon activism can backfire on a brand’s image, such as when Amazon faced scrutiny for sharing public-facing statements supporting the Black Lives Matter movement without implementing any real changes to reflect these statements into their internal policies and business practices.

Engaging in CSA should not be seen as a one-time opportunity to employ temporary tactics. You must first really know your brand and evaluate how taking a stance on social issues might impact your brand in the short and long term. Companies may find that a significant strategic shift may be needed, whereas other companies may find that their brand is already aligned with the causes they choose to now vocally support.

If after careful consideration, your firm does want to engage in CSA, and you want help measuring and/or reporting your impact, KERAMIDA has experts to help you. KERAMIDA’s team of Sustainability and ESG consultants have a wealth of expertise and experience in all aspects of ESG issues. We can work with managers and board members who seek to weigh their stakeholders’ values more heavily in their decision to engage in CSA. Please contact us or call (800) 508-8034 to speak with one of our Sustainability consultants today.

Blog Author

Becky Twohey, Ph.D.
Senior Sustainability Analyst
KERAMIDA Inc.

Contact Becky at btwohey@keramida.com.