Boosting CSR Investment

Is it better to frame CSR initiatives in terms of dollars or actual donations?
Boosting CSR Investment

WHEN A FIRM is undertaking a corporate social responsibility initiative, does it matter whether it donates cans of food or the money to buy those cans? Apparently, yes, according to four researchers: Bryan Church of the Georgia Institute of Technology in Atlanta, who died in 2017; Wei Jiang of Jinan University in Guangzhou, China; Jason Kuang of Georgia Tech; and Adam Vitalis of the University of Waterloo in Ontario, Canada.

They found that managers will invest more when CSR initiatives are framed in a nonfinancial way, such as planting trees or donating food, than if those initiatives are framed as a financial investment, such as donating specific dollar amounts to a cause. However, this only holds true when managers’ personal beliefs support the social norm underlying the CSR initiative.

In a lab experiment, researchers asked participants to act as corporate division managers whose companies were initiating tree-planting projects. Participants individually decided on the amount of resources to invest, which translated into real money paid to plant trees. What participants did not invest, they kept.

When managers consider CSR as a nonfinancial investment—for instance, deciding how many trees to plant—those who support CSR will promote the initiative. But when managers use more traditional financial measurements, such as deciding how much money to invest in tree-planting, they’re more likely to focus on economic costs. In this case, their personal CSR beliefs are not activated and they do not invest more in the initiative.

If companies expect managers to invest in CSR initiatives, say the researchers, they must understand that how they present those measures will affect managers’ decisions. Managers must both believe in the initiative and understand its social benefits.

“A Dollar for a Tree or a Tree for a Dollar? The Behavioral Effects of Measurement Basis on Managers’ CSR Investment Decision” appeared in the September 2019 issue of The Accounting Review.