Business Horizons (2010) 53, 445453

www.elsevier.com/locate/bushor

EXECUTIVE DIGEST

The benets and costs of corporate social responsibility

Geoffrey B. Sprinkle *, Laureen A. Maines
Kelley School of Business, Indiana University, 1309 East 10th Street, Bloomington, IN 47405-1701, U.S.A.

1. Perspectives on corporate social responsibility

Business leaders have expressed far-ranging and deeply-held opinions about corporate social responsibility (CSR). Nobel Prize-winning economist Milton Friedman (1970) succinctly expressed one viewpoint on CSR in his article The Social Responsibility of Business is to Increase Its Prots. John Mackey, the founder of Whole Foods, advanced a different viewpoint when he stated: The business model that Whole Foods has embraced could represent a new form of capitalism, one that more consciously works for the common good instead of depending solely on the invisible hand to generate positive results for society (Rethinking, 2005). Regardless of business leaders fundamental beliefs about CSR, they cannot ignore the implications of CSR for their businesses. Accordingly, our goal in this article is to provide some guidance for organizations that wish to assess the benets and costs of CSR. Knowledge of these benets and costs can inform managers decisions on their companies positions on CSR and provide input on CSR endeavors. Because accounting plays a vital measurement role in organizations, we focus on the interplay between accounting and corporate social responsibility.

We rst provide an overarching denition of corporate social responsibility and categorize the various types of socially responsible endeavors in order to identify activities associated with CSR that create costs. Following this, we articulate rms likely motivations for engaging in CSR in order to identify potential benets. We then discuss the role of accounting and corresponding linkages between accounting and CSR; here, we pay particular attention to how rms might measure the costs and benets of CSR decisions. Finally, we provide some concluding thoughts. Throughout the article, we offer numerous real-world examples to illustrate our ideas.

2. What is CSR?
The expansive literature on CSR contains numerous denitions of the construct. For example, the European Commission (2010) denes corporate social responsibility as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. A common denition in the management literature comes from Davis (1973, p. 312), who denes CSR as the rms considerations of, and response to, issues beyond the narrow economic, technical, and legal requirements of the rm to accomplish social [and environmental] benets along with the traditional economic gains which the rm seeks. Perhaps the most parsimonious denition that encompasses the above ideas is

* Corresponding author. E-mail addresses: sprinkle@indiana.edu (G.B. Sprinkle), lmaines@indiana.edu (L.A. Maines).

0007-6813/$ see front matter # 2010 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2010.05.006

446 that CSR represents voluntary rm endeavors which benet society. In addition to numerous denitions of CSR, there are many terms for the sameor similarconstruct. The most common term used in addition to corporate social responsibility is corporate sustainability. Corporate sustainability focuses on long-run shareholder value by incorporating principles in nine areas: ethics, governance, transparency, business relationships, nancial return, community involvement, product value, employment practices, and environmental protection (Epstein, 2008). Thus, the activities associated with corporate sustainability are very similar to those discussed in this article, although somewhat broader in scope. CSR comprises a number of corporate activities that focus on the welfare of stakeholder groups other than investors, such as charitable and community organizations, employees, suppliers, customers, and future generations. One important category of CSR activities includes corporate contributions of cash or products to charitable and community organizations. For example, Whirlpool Corporation (2010) donates a refrigerator and range to every home built by Habitat for Humanity in North America. Companies also allow employees to take time off from work to volunteer with charitable and community organizations. As an illustration, Eli Lilly (2010) designates one day per year as a Global Day of Service whereby all employees worldwide undertake volunteer activities for the betterment of their local communities. Many CSR activities relate to employee welfare and safety. Employee welfare encompasses initiatives ranging from the provision of educational benets to health support, such as on-site health clinics, tness centers, and wellness classes on stress management. Workplace safety also is a critical component of employee welfare, and many companies extend codes of conduct for employee welfare and safety to their suppliers. For example, McDonalds (2009) has a code of conduct that provides requirements for fair and safe working conditions for vendor employees and uses independent experts to audit vendors for adherence to the code of conduct. Companies CSR activities also focus on meeting customer desires and protecting future generations. For example, Procter & Gambles 2008 sustainability report indicates that the company wants to delight consumers with sustainable innovations that improve the environmental prole of our products (Procter & Gamble, 2008, p. 4). These innovations appeal to customers environmental concerns through reductions in packaging, and consumer water and energy use (Procter & Gamble, 2008, p. 40). Analogously, consumers concerns about the humane treatment of

EXECUTIVE DIGEST animals leads companies to engage in animal welfare activities. For example, The Body Shop (2010) bans animal testing and considers effects on endangered species habitats when choosing ingredients for the companys products. Other activities include using green production practices, such as conserving energy, reducing emissions, using recycled materials, reducing packaging materials, and sourcing materials from vendors located geographically close to manufacturing facilities. For example, Sony (2010) manages the impact of its greenhouse gas emissions by setting targets for carbon dioxide emissions from production, shipping, and product use activities. Companies often involve vendors and customers in their environmental efforts. Less than 5 years ago, Wal-Mart (2006) announced a program to measure suppliers on their ability to reduce packaging, with a goal of eliminating 5% of total packaging between 2008 and 2013. Similarly, Hewlett-Packard (2010) provides free recycling of toner cartridges for customers, while Staples (2010) provides greater incentives for recycling by offering customers $3 in Staples Rewards for each toner cartridge returned.

3. Why do rms engage in CSR?

There are numerous reasons underlying organizations motivations for engaging in socially responsible endeavors. First, rms may have altruistic intentions: they simply believe their CSR efforts are part and parcel of being a good global citizen. (Admittedly, it is difcult to disentangle such intentions from protseeking aspirations) For example, SC Johnson, Gap Inc., and Target prominently note on their websites that CSR and sustainability activities are simply the right thing to do. An oft-cited example involves Merck (2010): since 1987, the company has donated more than 2.5 billion tablets of the drug Mectizan1 (ivermectin) to help eradicate river blindness in parts of Africa, Latin America, and the Middle East. Some observers have noted that this program conveys few, if any, nancial benets to Merck (Dizik, 2009). Likewise, after 9/11, Procter & Gamble, Honda, and Wal-Mart donated millions of dollars in cash and products to relief efforts, but made the conscious decision not to publicize their contributions (Alsop, 2002). Almost certainly, many organizations are making similar unpublicized philanthropic contributions in response to the disastrous earthquakes in Haiti and Chile. Second, organizations may engage in CSR activities as window dressing to appease various stakeholder groups, such as nongovernmental organizations (NGOs). Viewed in this light, CSR may simply be

EXECUTIVE DIGEST another cost of doing business: it is something rms feel they have to do in order to avoid negative publicity and other actions from NGOs. For example, it has been suggested that Best Buys electronics recycling program, which is free to consumers, was established in part because of pressures from the As You Sow Foundation (Best Buy, 2008). In addition to incurring costs for CSR activities, it has been suggested that companies such as General Electric often are coerced by NGOs into incurring even more costs to report on their sustainability efforts (Murray, 2005); such reports might contain nothing but hot air. For example, British Petroleum received high marks for its reporting on safety issues during a period in which some individuals argued that its actual safety culture was poor, as evidenced by the explosion of a renery in Texas that resulted in numerous employee deaths and injuries (Jackson, 2007; Vogel, 2007). In essence, observers have stated that CSR is a con job. . .a neat trick used by NGOs as old-fashioned blackmail (Albrechtsen, 2006, p. 12), and that heightened corporate attention to CSR has not been entirely voluntary. . .the most common corporate response has been neither strategic nor operational but cosmetic (Porter & Kramer, 2006, p. 80). Third, there are potential contracting benets: rms believe that CSR helps recruit, motivate, and retain employees. Numerous sources list these reasons as one of the most signicant benets of an active CSR program. For example, Deloitte Touche Tohmatsu provides its managers the opportunity to participate in year-long programs dedicated to improving the skills and abilities of young students; the company believes this endeavor will help recruit top candidates. . .and increase retention rates of high-potential employees (Dizik, 2009, p. B8). For many years, Timberland has provided employees the opportunity to take signicant amounts of paid time off to volunteer for social causes of their choosing. The company notes that this program helps attract and retain valuable talent (Pereira, 2003). Increased employee motivation also is a key driver, as observers have noted that people are seeking meaning at work. . .and, it has become clear that staff motivation is a powerful bottom-line benet of corporate responsibility (Murray, 2007, p. 11). Increasingly, business students seem to be pushing their institutions for courses on social responsibility, suggesting that they are likely to seek full-time positions with socially responsible employers (Middleton, 2009). To this end, recruiters at Target have heard from job candidates that commitment to the community is one of the top reasons they desire to work for the company (Needleman, 2008). Fourth, there are customer-related motivations: CSR may entice consumers to buy a companys

447 products or services. As such, rms may reap price premiums or garner increases in market share. For example, one might view NBCs recent decision to offer more television programming dedicated to health and social issues through a municent lens. The decision, however, likely was far more strategic, as NBC was able to attract signicantand increasingly scarceadvertising dollars from companies wishing to link their products to shows socially redeeming values (Vranica, 2009). We also see organizations such as Crate & Barrel aligning themselves with non-prot charities like DonorsChoose, an organization dedicated to improving our public school resources. Here, consumers decide where Crate & Barrels charitable contributions will be directed; for example, which specic classroom projects, supplies, and so forth, to fund. Involving the customer in this fashion is, naturally, expected to stimulate loyalty and sales (Steel, 2006). Companies that manufacture and sell luxury goods also are getting in on the game. Louis Vuitton, for instance, has been introducing eco-friendly products and supporting environmental causes. In turn, this could entice customers to purchase the companys luxury items (Dodes & Schechner, 2009). Such efforts also may help luxury goods companies reinvent their images; perhaps away from blatant consumerism, toward an understanding of how luxury products might even be better for the environment (e.g., they last longer). Fifth, companies focus on environmental concerns can lead to reductions in production costs. For example, Wal-Mart reduced transportation costs by $3.5 million through one initiative to reduce packaging on toys. From a CSR perspective, the company also saved 3,425 tons of corrugated materials, 1,358 barrels of oil, 5,190 trees and 727 shipping containers (Wal-Mart, 2006). Energy conservation also is an area in which companies report signicant operating costs savings. Ecology and Environment, Inc. (2008) reported an 80% reduction in annual carbon emissions from its headquarters building, noting the efciency gains that resulted from these measures accrued an estimated net savings of approximately $232,000 from 1999 to 2008. Finally, CSR can be viewed as an integral part of a companys risk management efforts. To this end, CSR may be an effective lever for easing legal or regulatory constraints. For example, companies may voluntarily reduce emissions in an effort to thwart legislation that could impose even tighter standards (Bradsher & Revkin, 2001). CSR also may reduce the likelihood of untoward incidents occurring, which in turnreduces the chances of lawsuits and damage to the rms reputation (A Stitch, 2008). The costs of not managing such risks can be substantial; a popular example relates to Mattels experience with

448 Chinese suppliers who used lead paint in the manufacture of toys. CSR may help manage such risks by ensuring that reputable and sustainable business practices are being followed throughout the supply chain. CSR may further manage risks associated with product obsolescence and the like; American Electric Powers dedication to clean energy could, for example, be a Darwinian reaction to legislation that might otherwise jeopardize future prots. In the end, companies desperately wish to avoid disasters like the Exxon Valdez and Union Carbide Bhopal incidents. We close this section by noting that there likely are other reasons associated with an active CSR agenda. For example, just as customers may be more likely to purchase goods and services from socially responsible rms, suppliers may be keen on working with such organizations; there may be positive spillover effects for the supplier. It also is possible that rms engaging in CSR are more likely to attract capital from investors (e.g., start-ups) and receive more favorable terms from creditors. Many individuals likely wish to align their investment dollars with their moral aims.

EXECUTIVE DIGEST several ways that organizations might accomplish the second step of estimation. We hope that our discussion spurs corporate decision makers to make informed CSR decisions. At the end of the day, decision making involves trading off what you get with what you give up. As such, effective CSR decisions rely on assessments of value and opportunity cost.

5. Measuring CSR costs

Costsas well as benetsarise from performing activities. Indeed, the concept behind activity-based costing, a popular managerial tool, is that products and services require activities which consume resources such as cash or employee time (Balakrishnan, Sivaramakrishnan, & Sprinkle, 2009). The costs associated with CSR can be measured by identifying the activities associated with CSR, discussed in Section 2, as well as the activities the company was unable to undertake due to engaging in CSR activities (i.e., opportunity costs). The activities associated with CSR can lead to both increased outlays of cash and reductions in cash inows. The costs associated with cash contributions include the raw cash ows less the reduction in taxes. Charitable contributions are deductible for tax purposes up to 10% of taxable income before certain adjustments. For most companies, it is unlikely that contributions will exceed this 10% threshold. So, assuming a corporate tax rate of 35%, if an organization donates, say, $2 million dollars to Doctors Without Borders, then the net cost would be $1.3 million (= $2 million 0.35 $2 million). For product contributions, the outow would equal product cost (materials + labor + overhead) lessagainany tax benets. In many instances, the tax deduction equals product cost plus 50% of the lost prot. So, for example, assume Whirlpool donates refrigerators costing $4 million to Habitat for Humanity and these refrigerators have a market value of $6 million. Assuming a 35% corporate tax rate, the net cost to Whirlpool would equal $2.25 million (= $4 million (($4 million + ($2 million lost prot .50)) .35)). Firms also must consider the opportunity costs associated with cash and product donations. For example, if the $2 million contribution to Doctors Without Borders could be used for another project that generates a 12% return, then this cost (lost after-tax prot) needs to be considered. Likewise, Whirlpools donation of refrigerators has a similar opportunity cost, which would include a possible reduction in salesperhaps not in the mainstream market, assuming contributions do not signicantly

4. The role of accounting

The heart of accounting is measurement. Accounting aims to provide decision makers, both within and outside the rm, with relevant and reliable cost and benet information to support decision making (see, e.g., Balakrishnan, Sivaramakrishnan, & Sprinkle, 2009). Externally, investors use accounting information to make stock acquisition and disposition decisions, and banks use accounting information to make lending decisions. Internally, accounting supports decisions that span the value chain, from the purchase of materials to product promotion and pricing to after-sales support. Decisions related to corporate responsibility also can be viewed through the lens of benets reaped by, and costs incurred by, the company. There are two aspects of measurement: identifying costs and benets, and estimating costs and benets. As identication is the rst step, our primary goal is to delineate the specic costs and benets associated with CSR. On the cost dimension, we map costs to previously-discussed CSR activities and identify opportunity costs associated with activities that a company foregoes as a result of engaging in CSR activities. On the benets dimension, we map the aforementioned reasons rms engage in CSR to more specic, tangible benets. Our list is by no means exhaustive. Many of the costs and benets we identify likely are difcult to estimate. This concern notwithstanding, we suggest

EXECUTIVE DIGEST restrict supply, but to Habitat homeowners who may otherwise have purchased a Whirlpool product. For contributions of employees time, there really are not any tax benets vis-a-vis the wages paid to ` employees; wages are deductible for tax purposes regardless of whether employees volunteer their time. When employees volunteer their time, however, there almost certainly is a cost associated with reductions in productivity. For example, in a recent year, KPMG employees volunteered 32,000 hours of their time to charitable endeavors (Murray, 2007). Assuming a hypothetical average billing rate of $150 per hour, this translates to $4.8 million in lost revenues. Of course, this calculation assumes there is a demand for the volunteered hours and not an excess capacity for labor. Perhaps KPMG employees volunteer during the off season, when there is not enough business to keep all employees fully utilized. If this is the case, then the opportunity cost of laborbased contributions is close to zero and, as such, allowing employees to volunteer is cheaper than making cash and product donations. Measuring the cost of lost productivity is easier in organizations where the relationship between labor inputs and revenue is sharp (e.g., accounting rm, law rm, production-line worker). The cost is more difcult, but not less important, to measure when the inputoutput relation is not as clean (e.g., a corporate administrator). It also is possible that organizations hire additional personnel to cover for the lost time and productivity; for every 2,000 hours volunteered, for example, one additional employee may need to be hired. Assuming a positive margin, this would be a less expensive solution to taking the revenue loss. Additional employee costs include those related to having dedicated employees focused on CSR efforts; for example, the costs of employees identifying and coordinating CSR activities and putting press releases and lengthy reports together. The wages paid to these employees certainly should be considered. Finally, labor costs would include those related to the use of consulting rms; the recent focus on sustainability has been a boon for advisory-services rms (Davoudi, 2008). Costs associated with CSR environmental activities can be estimated by comparing the cost of green approaches to those of traditional approaches. For example, the cost of making products using recycled raw materials can be compared to similar costs for using new raw materials. The incremental costs of using recycled products may extend throughout the production process; for example, greater scrap or greater labor costs may be associated with the use of recycled materials. We note, however, thatas discussed in Section 6the costs of environmentally-friendly approaches may

449 actually be lower than those of traditional approaches, resulting in a benet rather than cost. Organizations must also consider whether their CSR programs have negative effects on customers and employees. For example, many department and grocery stores ask customers to make contributions to charity. Such strong-armed solicitations may make customers uneasy and engender negative goodwill, increasing the likelihood that consumers will take their business elsewhere (Felten, 2010). Whether consumers embrace or shun such programs is an empirical question. Organizations could survey their customers, including whether complaints have increased, or examine sales before and after implementation to assess whether there are gains or losses connected with such programs. Finally, organizations routinely prod employees to contribute to organizations such as the United Way. The effects on employee effort are uncertain, butagaincould be measured via surveys or productivity around solicitation efforts. Finally, other costs should be considered, but may be rather difcult to estimate. For example, organizations might assess the relation between the size of their contributions to CSR efforts and the benets received; that is, bang for the buck. We posit that the relation between costs and benets likely is concave, suggesting that returns diminish as the level of CSR increases. In like fashion, organizations should ensure their CSR efforts t with their missions and product/service offerings. For example, Whirlpools alignment with Habitat for Humanity seems ideal; other organizations should strive for similar mappings.

6. Measuring CSR benets

Many of the benets of corporate social responsibility naturally mirror the reasons rms engage in CSR. We view these benets in terms of increased cash inows to the company or reduced cash outows. Next, we list some of the more salient benets that rms may wish to estimate. First, above and beyond the tax deductions garnered by cash and product donations, local, state, and federal agencies frequently provide tax credits for CSR and sustainability efforts. For example, RBC Bearings recently received $8.3 million in federal tax credits associated with the production of wind turbines. In like fashion, companies can receive tax credits for using green materials and practices in the renovation and construction of buildings; for instance, by obtaining Leadership in Energy and Environmental Design (LEED) certication. Additional tax incentives can come in the form of

450 sales-tax exemptions and property-tax abatements. Such credits and incentives are relatively straightforward to measure in an ex ante fashion and entail an understanding of applicable laws and regulations. Second, companies frequently reap free advertising as a result of CSR. It is quite common for organizations good deeds to receive coverage on local and national radio and television, and be the subject of articles in newspapers, trade journals, and magazines. Almost certainly, organizations know what it costs to place an advertisement in these various media outlets. By tracking media hits and tallying the costs associated with equivalent ads, companies might reasonably estimate the benets of such publicity. Thirdand as discussed earlierCSR frequently is a means for attracting, motivating, and retaining talent. Of these, reductions in turnover (retention) may be the easiest to measure. Organizations can survey employees reasons for staying with, or leaving, the rm and map their responses to CSR-related questions into differential retention rates. In turn, rms can translate increased retention rates, if they exist, to the costs of employee turnover. Research suggests that the costs of employee turnover can be quite steep, ranging from 50% of base salary for entrylevel positions to 400% of base salary for highly-skilled specialists (Blake, 2006). Thus, if CSR helps retain one highly skilled employee who earns $100,000, this translates to a $400,000 benet. In terms of motivating employees, recent research suggests that CSR may engender altruistic rm-contributions from employees and facilitate the use of implicit, or trust-based, contracts (Balakrishnan, Sprinkle, & Williamson, 2010). As such, CSR may increase employee motivation and reduce the need for costly performance evaluation and measurement systems. Estimating such benets can be tricky and might entail examining employee productivity surrounding CSR activities. For example, employee performance may increase before and after they volunteer their time to a socially relevant endeavor. Additionally, organizations may reap longerterm benets from employee volunteerism programs in the form of increased abilities and knowledge, such as enhanced leadership skills, networking, and strategic vision (Needleman, 2008). As an estimate, rms could measure the performance of employees who have participated in CSR programs to those who have not, controlling for prior performance. Recruiting benets may be the most difcult to estimate. They are, of course, inextricably linked to increased performance and prots via enhanced employee motivation and reductions in turnover. As such, rm measurement efforts on this dimension may best be centered on estimating the raw

EXECUTIVE DIGEST ability of new hires, as well as reductions in recruiting costs. Some possiblealbeit imperfectproxies for the skills and abilities of new hires could relate to the number of applicants (suggests a deeper talent pool), yield rates (employers are hiring the employees they most desire), GPA (for entry-level positions), number of degrees and quality of academic institutions attended, and internal promotion percentages. Admittedly, such measures may be confounded with macroeconomic conditions and many are soft in the sense of being difcult to relate directly to rm performance; nonetheless, given individuals preferences in working for socially responsible organizations, they should be considered in the CSR decision-making process. Firms also might reap reductions in the costs associated with hiring, including those related to advertising, HR personnel, travel for recruiters and job candidates, and requisite training. Any reductions in the average cost per hire, multiplied by the number of hires, provides an estimate of the benets received. Of course, linking such reductions directly to CSR may be problematic and yield imprecise estimates. Fourth, CSR efforts may lead to efciencies and cost savings in the value chain. In addition to employee motivational benets (reduction in labor costs), there are other development, production, and aftersales benets to consider. For example, more and more rms are using sustainable practices such as biomimicry, whereby design and manufacturing efforts are inspired by nature. Biomimicry can enable rms to increase product reliability and cut aftersales costs. A recent example relates to Volvo: by imitating properties of locusts vision, which allow the insects to avoid collisions in massive swarms mirroring trafc jams, Volvo contends it is able to develop a safer car (Patton, 2009). Other rms, such as IBM, have followed suit. Many companies believe that biomimicry and other green practices can lead to marked reductions in materialsfor example, reductions in chemicals in the manufacture of clothing, as practiced by Finisterre, a company that makes some items based on the structure of an otters fur and production costs (Robbins, 2001). As materials costs generally are directly traceable to products, any savings should be readily measurable. Another example relates to Wal-Mart: the company has saved over $26 million per year in fuel costs, and markedly reduced carbon dioxide emissions, by using auxiliary power units to heat and cool truck cabs during mandatory rest stops (Diamond, 2009). In addition to using fewer materials and reducing associated costs, green production may reduce both internal andas alluded to by the Volvo exampleexternal failure costs, thereby providing benets via shrinking the costs of quality. For internal

EXECUTIVE DIGEST failure costs, rms can measure relevant benets by estimating reductions in expenses related to, for example, scrap, rework, and inspection. External failure costs can come in the form of customer complaints and returns, repairs and warranty work, and product recalls. External failure costs frequently are believed to be signicantly higher than the visible costs. Accordingly, rms may wish to take the measured costs and use, for instance, the Taguchi loss function to translate any reductions in after-sales costs to realized benets. No rm wishes to suffer the massive recalls and external failure costs experienced by, for example, Toyota; the ultimate costs borne by Toyota will surely exceed the costs of xing faulty gas pedals and brakes. There are additional risk management benets to consider. For example, by self-imposing lower waste, carbon-footprint, or other standards, rms may avoid litigation and/or tighter and costlier future regulations. As noted by Sharma, Teret, and Brownell (2010, p. 242), when government intervention is perceived as a threat. . .self-regulatory actions are a means to prevent or forestall outside regulation. For example, rms in the food industry have voluntarily provided more informative labels, curtailed marketing efforts directed at promoting unhealthy foods to children, and pledged to sell fewer such products in our schools (Sharma et al., 2010). The authors further note that companies operating in the alcohol, chemical, tobacco, forestry, and shing industries have similarly attempted to self-regulate, albeit with varying degrees of success. To estimate such benets, rms would have to attach probabilities to possible regulatory or litigation outcomes and estimate future cash outows associated with compliance (investments in people, property, plant, and equipment) or settlements. Net-present value analysis would then be an appropriate tool to discount and aggregate any such savings. Likewise, real-options analysis plays a role in evaluating how investments in socially responsible practices today may yield benets in the form of future exibility by allowing rms to be more nimble and cost efcient in responding to legal, competitive, or other contingencies. For example, Calpine Corporation is building a power plant in California that markedly reduces carbon dioxide emissions, well below those required by current standards. One rationale is that it provides Calpine exibility in responding to possible future regulations (Schwartz, 2010). Moreover, Chevron believes that building clean [oil] facilities now minimizes having to do expensive retrotting (due to stricter environmental standards) later (Diamond, 2009, p. C14). Fifth, rms might reasonably expect a positive relation between their CSR efforts and consumers

451 purchasing behaviors. As discussed in the costs section, some CSR activities may have unintended consequences vis-a-vis consumer spending. That ` said, most CSR efforts are likely to attract consumer dollars or, at worst, have a benign effect. Again, customer surveys would seem to be an important vehicle for assessing the overall impact of CSR on the very important customer constituent group, as well as teasing apart which programs areand which are notresonating with consumers. Such surveys could link CSR to consumers considerations and preferences for a companys brands and products (intended purchasing behaviors), levels of purchases, customer satisfaction, as well as loyalty and corporate image metrics. Ultimately, such responses should map into sales and prot and, as such, dovetail with rms efforts to measure the customer perspective of the balanced scorecard. Companies such as Crate & Barrel are involving consumers in the process by allowing them to select, via programs such as DonorsChoose, where a companys charitable contributions will be directed; eBay, Bank of America, and Yahoo have employed similar programs. Via this practice, companies have a ready control group where they can use surveys to compare intended purchasing behaviors between consumers who receive DonorsChoose gift certicates versus those who do not receive certicates. In Crate & Barrels case, 82% of consumers who redeemed the certicates were very likely to consider Crate & Barrel for their next home furnishings or accessories purchase compared to 76% of a control group of customers that didnt get certicates (Steel, 2006, p. B1). Crate & Barrel could map such responses into prot by taking the increased percentage multiplied by the margin associated with an average purchase. Finally, as mentioned in the Why do rms engage in CSR? section, there are other benets that organizations may rightfully attempt to estimate. For example, do CSR endeavors increase rms access to capital and/or lead to more favorable lending terms in the form of lower interest rates and the like? Does CSR increase barriers to entry and, perhaps, stave off competition (see Survey, 2005)? Moreover, to the extent rms CSR efforts are motivated by altruism, it is important to consider increases in social welfare. These benets are exceedingly difcult to quantify: How do you measure the benets of a family having a new home (Habitat for Humanity), a disabled person receiving a computer (Cristina Foundation), or a child getting necessary food, clothing, and medicine (UNICEF)? There clearly is an element of subjectivity in making such estimates; organizational participants need to have faith that their CSR

452 efforts are making a signicant difference in the lives of others.

EXECUTIVE DIGEST
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7. Concluding thoughts
Organizations increasingly are concerned about how their actions affect the environment and social welfare. Employees, consumers, investors, lenders, governmental agencies, and other stakeholder groups are demanding that rms operate in a socially responsible manner. While internalizing societal goals is laudable, organizations cannot wantonly abandon their prot maximization aims. As with other organizational decisions, CSR decisions are not made in a vacuum but, rather, are made via an informed understanding of the benets reaped and the costs incurred. To this end, organizations need to assess what theyand othersare getting and giving up from their CSR decisions.

Acknowledgment
We greatly appreciate the helpful comments and suggestions of Ramji Balakrishnan, Jason Brown, Jerrold Stern, and Michael Williamson.

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