Literature Review: Corporate Social Responsibility & Financial Impact

This literature review delves into the relationship between Corporate Social Responsibility (CSR) principles and the financial performance of business organizations. It highlights the increasing importance of CSR in today's business environment due to factors like resource shortages and environmental degradation caused by aggressive business strategies. The review explores the core aim of CSR, which is to protect the interests of all stakeholders involved in the business, and its association with financial performance. It discusses the controversies surrounding the implementation of CSR and its impact on accounting and finance policies. The methodology involves collecting secondary data from relevant databases, primarily using Google Scholar to identify peer-reviewed journal articles. Key concepts and theories related to CSR and financial performance are examined, including the positive impact of CSR on brand value and sustainability, as well as the potential risks and limitations associated with its implementation. The review also addresses the challenges in measuring CSR performance and emphasizes the significance of ethical business values and stakeholder engagement. It concludes by summarizing the positive relationship between CSR and financial performance while acknowledging the complexities and potential conflicts that may arise in practice, particularly with the increasing demands of consumerism and unethical business practices.

Running head: APPLLED BUSINESS RESAERCH
Applied Business Research
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Table of Contents
Abstract............................................................................................................................................2
Purpose.........................................................................................................................................2
Methodology................................................................................................................................2
Findings........................................................................................................................................2
Limitations and Implications.......................................................................................................3
Introduction......................................................................................................................................3
Background to Research..................................................................................................................4
Key Concepts...............................................................................................................................4
Key theories.................................................................................................................................4
Context of the Study....................................................................................................................4
Review of the Literature and Discussion.........................................................................................5
Conclusion.......................................................................................................................................9
Summary and Contribution..........................................................................................................9
Gaps.............................................................................................................................................9
Future Studies............................................................................................................................10
Reference.......................................................................................................................................11

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Abstract
The modern society is facing crisis due to shortage of resources and environmental
degradation that are mainly composed by aggressive business and marketing strategies. In order
to maintain sustainable business practice the principles of Corporate Social Responsibility has
been implemented.
Purpose
The main aim of the principles is to ensure the interest of every group of stakeholders
involved with the business are being protected. Nevertheless, the principles of CSR are highly
associated with the financial performance of a company. There has been several controversies
related to the implication of CSR in respect to the finance and accounting policies that are being
implemented. The current study will therefore discuss about the existing literature related to CSR
principles and the implications of the same in respect to the overall financial performance of a
business organisation.
Methodology
Appropriate research method of collecting secondary data will be implicated, which will
ensure that appropriate relevant databases are being used for the same.
Findings
After the review of discussion has been concluded it will be possible to identify the
existing gaps of the current literature. This will also help to focus upon the need of future
research work related to implications of CSR principles in financial performance.

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Limitations and Implications
As the review has been conducted, it will be possible to highlight upon the limitations
that will be mentioned in the forms of identified gaps. This will help to ensure that CSR
principles can be implicated for the future better development of the financial performance.
Introduction
The idea of the corporate social responsibility (CSR) has become widely popular with the
global business community in the recent days, which mainly aims to bring about sustainability
within the business. It also ensures that the business strategies are able to promote the interest of
the society. In the given context, the current study will aim to discuss upon the literature that
discusses about the principles of CSR in context of the accounting and finance services. The
relevant ideas about the given topic will be critically analyzed. The existing gaps will also be
highlighted.
Methodology
The essential step in conducting the literature review is to gather relevant information
about the given topic from the previously conducted research work. For this purpose, the relevant
databases related to the business research have been used to get the latest and updated
information related to the CSR and its impact on the finance and accounting service. Google
scholar will be used as the primary search engine databases that will help to explore various
relevant journal articles. The key word of “corporate social responsibility”, “finance and

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accounting management” will be used as the key search terms. The journal articles, which are
not peer reviewed will be eliminated. The key ideas related to the topic in each of the chosen
articles will be focused as a part literature.
Background to Research
Key Concepts
The principles of CSR have widely affected the future growth of business and its impact
value upon the society. According to Ruggie (2017), the principles CSR, focuses upon the
sustainable business growth that are able to generate new opportunity for the account service
firms. The major components of the CSR are considered to be in line with the audit and
assurance service along with the consulting agency that is in line with the finance and accounting
industry.
Key theories
 Theories related to corporate social principles
 Theories related to financial performances
Context of the Study
Following are the context that are to be proved using the relevant theories related to CSR and
relate the same with the financial performance:
 The implications of the CSR principals have positive impact on the financial performance
of a business organization.
 The implications of CSR principles can give rise to controversy due to poor levels of
financial performance.

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Review of the Literature and Discussion
According to the study of Brueckner et al. (2018), the implementation in the principles of
CSR are widely getting poplar as it is one of the essential marketing and business ethics tool that
are needed to improve the brand value with the society. 93% of the top 250 business corporations
publish their annual CSR report that is released for awareness generation of the future
generation. This was mainly due to pressures that are generated from the stakeholders to
implement business strategies for protecting the needs of the environment. Lin et al. (2017), have
added in the context that one of the crucial elements of the CSR principles is due to the fact that
it helps the business to establish essential relationship with the society.
There are however, wide spread ideas related to the CSR that are responsible for
controversies related to the finance and accounts management. The relationship between the
CSR principles and financial performance has been one of the essential topics of business
research. From the findings of Nollet et al. (2016), it can be said that business firms, who are
able are able to implement better social responsibilities are able to generate high financial
performance. This positive relationship between the financial performances and the CSR
principles are responsible for high brand value and sustainability. On the other hand Lins et al.
(2017), have argued about the fact that high level of linkage between the financial natters and
CSR increases the business risks. This is due to the fact that due to the limitations that are
imposed by the CSR principles, the companies cannot implement the effective competitive

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advantage policies. There are additional extra expenses that are needed for the dealing with the
social responsibilities and abiding by the business ethical principles.
The Corporate financial performance is believed to have an effective relationship with
principles of CSR as it can have a significant impact upon the demand level of stakeholders. The
component of financial performance is considered to be an essential element of corporate
governance in all business organizations. Flammer(2015), has mentioned that few of the essential
corporate responsibilities of business organizations include investment in controlling
environmental pollution. This type of investment is believed to have a major impact upon the
annual financial performance. Nevertheless, the company is able to generate higher brand value
with social responsibility and spreading essential information about the significance of protecting
environment from aggressive marketing policies.
The positive relationship between CSR and Corporate financial performance is believed
to have greater impact of on higher profit rates that are being generated. There are other opinions
related to the relationship between CSR and financial performance, which highlights that there is
no positive or negative impact upon the overall company's performance.
It is important to measure the overall performance of corporate social responsibility, which will
help to establish relationship with corporate financial performance. Nevertheless this is one of
the challenging tasks as currently there is no theoretical consensus and performance scale for
perfect measurement of CSR. There are additional challenges due to the multidimensional nature
of the CSR principles, which varies from the nature and job profile of the industry. Nevertheless,
as mentioned by Saeidi et al. (2015), the social reputation of a company that can be calculated
with the help of ethical business values are believed to effective in measuring the success rate of
the company in implementing CSR values.

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According to Kanget al.(2016), the content analysis of corporate communication is also
one of the major scale for evaluating the value of CSR with respect to particular industry. For
this purpose, it is essential to get detailed company information from various groups of
stakeholders. This includes the total value of carbon emission that occurred from the
manufacturing unit of a company. The total value of the natural resources utilized by the
company in a financial year can also help in the matters of evaluation in the effectiveness in CSR
implantation. In other words, the companies, which are able to make optimized use of natural
resources, are considered to have better ability to implement CSR principles in practice.
According toWang et al. (2015), financial theories can be used in order to define the over
line objectives of Corporate responsibility. This will help to ensure that objectives of financial
stakeholders are fulfilled. The companies can also be encourage to invest more in social
development and philanthropic activities. The business organisations need to understand the
ethical principles that are related with people within the community. Better level of cooperation
can be available from the society, which will help them to establish better reputation within the
customer groups.
Another essential element of corporate social responsibility is looking after the need of
the employees within the organisation. As the interest of the employees are protected within the
workplace it is possible for the management to get best level of performer’s productivity. The
multidimensional nature of CSR can help a business organisation to achieve popularity at every
social aspect.
The business principles of McDonald's can be given in the context which will help to
understand the importance of multidimensional nature of CSR. Being one of the world's largest
fast food chain producer, the McDonald's are famous for four basic principles of CSR. The

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primary principle is dependent upon sustainable supply chain management. This helps to ensure
that the company is purchasing quality raw materials that are needed to ensure proper health for
manufactured food. The company also has a specific group of supplier, which provide them with
quality raw materials. The company has also set up partnership with environmental defence fund.
This help them to reuse or recycle all waste products that are being generated from the
manufacturing unit. In order to promote awareness about the nutritional value of the food that are
sold, the company provide detailed information about calorific value of every category of food.
The company also donate huge amount in charitable society and non-profit organisation in order
to ensure better health care and education service are being provided to the deprived section of
the society (Palmer 2012).
Due to the increase level of corruption and malpractice in business, the value of the
ethical principles are losing its significance in the current business environment. This is resulting
in the companies facing huge financial loss as they are losing employees as well as customers.
All group of stakeholders are being affected by the malpractices that are being used in modern
day business. Due to the limitation of CSR principles, it is often a more issues that are being
faced by the business analytics. Rapid rate of increase in demand of consumer product or
enforcing business organisation to adapt unethical policies to meet up the requirement in current
situation.
All business organisations are aiming to make use of this opportunity in order to improve
upon their financial performance. Hence, in the given context it can be said that effective
financial performance is inversely related to the practical application of CSR principles.

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Conclusion
Summary and Contribution
From the above conducted literature review, it can be concluded that principles of
corporate social responsibility is highly interlinked with the financial performance of a business
organisation. Due to the growing competitive advantage policies implemented by multinational
corporations, certain group of stakeholders in business are highly getting affected negatively. In
order to deal with the same the principles of corporate social responsibility are being
implemented in practice. According to most of the business research work, there is a positive
relationship between the principles of CSR with that of financial performance of business
organisation. Nevertheless, it is also important to note that while business organisations are
implementing CSR principles, there is high level of financial risk that are being involved in
marketing operations.
Gaps
In spite of the fact that the existing literature has been able to discuss both the positive
and negative impact of relationship between CSR principles with that of financial performance, it
has failed to describe the ways to overcome the negative impact and limitations of CSR. Another
major gap in existing literature is the fact that proper evidence related to the positive impact of
financial performance in implementing CSR principles are not clearly highlighted in the context
of all forms of industries. In other words it can be said that the CSR principles that are analysed
is not applicable for all type of business environment in modern society.

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Future Studies
In order to improve upon business reputation and deal with the limitation of CSR
principles, the future research work need to analyse the financial aspects of business
performance. Effective financial strategies also need to be focused as a part of future research
work, which will help to ensure that the companies are not facing any form of poor financial
performance as they are implementing CSR principles. Hence, the future research work will help
to ensure that multinational business corporations are better able to understand the requirement
of the society and are able to develop upon the needs of the environment.