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Corporate Social Responsibility on Profit

To obtain a competitive advantage is a priority for firms competing in the complex global environment of today. Currently, it is thought that these advantages are often linked to the adoption of socially responsible behavior. The goal of this paper is to examine whether business performance is affected by the adoption of practices included under the term Corporate Social Responsibility (CSR). To achieve this goal, we analyze the relation between CSR and certain accounting indicators and study whether there exist significant differences in performance indicators between Norwegian and Swedish firms that have adopted CSR and others that have not. The effects of compliance with the requirements of CSR were determined on the basis of firms included in the Dow Jones Sustainability Index (DJSI), and the specific accounting indicators were applied to measure performance. Performance is a more complex measure than to be wholly based on accounting indicators, but due to time constraints and the absence of other economic performance indicators to collect, it was decided to measure the business performance in terms of accounting indicators only. We find that the adoption of CSR has a short-term negative impact on profit, but a positive impact on revenue. Considering the fact that we have 13 years of data for this study, there might be a possibility that the positive relation between CSR and revenue can eventually surpass the cost of implementing and maintaining a sustainable practice, leading to increased profit in the long run.