Research pick: "Environmental uncertainty and corporate social responsibility"

There is a significant negative correlation between environmental uncertainty and corporate social responsibility, according to a study published in the International Journal of Business and Systems Research. The conclusion drawn from 23 years of data associated with more than 3000 companies in the USA suggests that an ethics view should be taken when it comes to corporate social responsibility rather than allowing a changing environment to determine whether or not a company makes a positive ethical decision or not.

Brian Chabowski and Li Sun of the Collins College of Business at the University of Tulsa, in Oklahoma and Sharon Xuerong of the Huang Miller College of Business at Ball State University, in Muncie, Indiana, explain that their insights could offer policymakers solid guidance on taking an ethical stance rather than allowing the business environment to steer policy. A new ethical stance could provide clearer and more positive approaches to employee lay-offs, union relations, health & safety, retirement benefits, as well as recycling, pollution limitation and clean energy, and even in some instances human rights, whether those of indigenous people in the company’s own country.

“To the best of our knowledge, this is the first study that performs a direct empirical test on the relationship between environmental uncertainty and corporate social responsibility (CSR),” the team writes. “Overall, our study shows that managers engage in less CSR activities when in an uncertain environment,” they add. This is perhaps to be expected after all CSR might be costly and when markets are not in favour of a particular company then cuts have to be made. However, the team suggests that there are practical implications that would preclude the need for a company to abandon its ethical stance and instead simply temper its CSR to some degree when the firm is faced with a volatile environment.

Chabowski, B., Huang, S.X. and Sun, L. (2019) ‘Environmental uncertainty and corporate social responsibility‘, Int. J. Business and Systems Research, Vol. 13, No. 3, pp.364-389.