Something for the weekend

This week academics look at companies’ CSR policies and ask if they act as insurance and protect against negative publicity

Many companies today have visible corporate social responsibility policies.

Behaving in a socially responsible manner benefits the community, the environment and society at large. Moreover it also helps when it comes to public relations, with companies hoping that their organisations will be favourably perceived by the general public because of their CSR policies.

But does CSR also act as a type of insurance, protecting a company from extreme negative publicity when things go awry?

To test their hypothesis that the public will extend more goodwill to a company with active CSR policies when bad news hits, academics from Harvard Business School and Columbia Business School gathered data on oil spills over a six-year period.

Felix Oberholzer-Gee, a professor of business administration at HBS, Jiao Luo, a doctoral student in the management division at Columbia and Stephan Meier, an associate professor of business, also at Columbia, collected newspaper reports over the same period to see whether they received negative publicity, or whether their CSR record acted as mitigation, at least in part, in the eyes of the media and general public.

However analysis of the data showed that whether or not they had higher CSR scores – using statistics gathered by a research company that ranks companies on environmental strength and environmental concern – the academics found that the tenor of the media reports remained the same. Those companies with positive environmental records were criticised just as much as those without CSR track records.

“The idea that if you invested in CSR in the past then people will think more highly of you in the case of an accident, this idea is not borne out in our data,” says Prof Oberholzer-Gee.

The article, “Why good deeds invite bad publicity”, is published online at HBS Working Knowledge.

● The emerging middle classes of the Bric countries are an obvious target for those who sell consumer products – household appliances, food and drink for example. Analysing the buying decisions of these new consumers can provide a wealth of information, especially for the vendors of premium products.

But research by two professors into the soda choices of Brazilians new to the middle class could well give such vendors cause for concern. The pair looked at soda consumption by consumers over approximately a seven-year period. They divided these consumers into groups of what they described as poor, newly affluent and established affluent. The academics were interested to see whether when consumers moved from the poor group into the newly affluent category if their buying behaviour would differ from consumers in the established affluent group.

“They’re perhaps more price sensitive and since they are new consumers, they haven’t yet formed habits – especially the habit to shop for premium brands,” says Prof Alberto Salvo, an assistant professor of management and strategy at the Kellogg School of Management.

With his colleague Alon Eizenberg, an assistant professor at the Hebrew University in Jerusalem, Prof Salvo modelled that behaviour, matching socio-economic data with information on relative sales of high-priced and heavily advertised premium brands and lower-priced generic brands that tend to appeal to the less well off. Their model reveals that newly affluent individuals tend to remain with the type of brand they have been consuming.

“When the newly affluent buy generic rather than premium brands, they might develop the habit of buying frugally,” says Prof Salvo.

The writers add that if frugal habits take root, premium brands could find themselves losing considerable market share.

The study, “Grab them before they go generic: habit formation and the emerging middle class,” has wider implications say the writers. “Consumers in emerging markets are viewed as an engine of growth for multinational firms and for the global economy as a whole.” Understanding these markets should be of interest to both policy makers and companies they add.

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