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Impact of CSR Activities Towards Different Stakeholders on Indian Firms’ Performance

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Abstract

This article investigates the subtle interplay between Corporate Social Responsibility (CSR) activities aimed at distinct stakeholders and their detectable impacts on both financial and non-financial components of organisational performance. This study leverages the sophisticated analytical framework of Structural Equation Modelling to clarify a comprehensive model using a robust dataset covering 600 Indian enterprises. The empirical findings of this study provide crucial insights with significant significance for managerial decision-making and regulatory issues. Notably, the findings highlight the strategic importance of adapting CSR initiatives to specific stakeholder groups. A strong positive link develops between CSR efforts directed at suppliers and investors and the achievement of improved overall organisational performance, spanning both financial and non-financial domains. Furthermore, the study identifies a compelling possibility for enterprises to improve their financial performance by implementing customer-focussed CSR efforts. This discovery reveals a previously unknown option for increasing financial prowess. Concurrently, the study advises caution, demonstrating a varied trend in terms of CSR targeting of employees and the community. While such programmes initially have good connections, there is a threshold beyond which the proclivity for negative effects on financial performance becomes obvious. Notably, by diving into the deep fabric of stakeholder-targeted CSR activities and their numerous repercussions on both financial and non-financial dimensions of organisational performance, this study makes a pioneering contribution.

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Authors and Affiliations

  1. Institute of Management, Nirma University, S G Highway, Ahmedabad, Gujarat, 382481, India

    Ansita Aggarwal & Nisarg A. Joshi

Authors
  1. Ansita Aggarwal
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  2. Nisarg A. Joshi
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Correspondence to Ansita Aggarwal.

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Appendix: Questionnaire items

Appendix: Questionnaire items

Items

An equal opportunity action plan for all the employees. (EMP1)

Anti-discrimination policies towards issues of gender, pregnancy, marital status (EMP2)

Policies towards sexual harassment prohibition (EMP3)

Policies towards disability/disability harassment prohibition. (EMP4)

Policies to ensure representation of women and minorities in the Board of Directors. (EMP5)

Compensation of workers as per legally mandated minimum wages (EMP6)

Policies towards prohibiting forced overtime (EMP7)

Policies for the training and development of employees (EMP8)

Special staff development opportunities for women and minorities (EMP9)

Promotion policy for women and minorities (EMP10)

The right to freedom of association, collective bargaining, and complaint procedure (EMP11)

Policies covering health and safety at work (EMP12)

Provision for formal worker representation indecision-making (EMP13)

Competitive prices and payment conditions for products commensurate with quality (CUST1)

Policy/management systems for customer satisfaction (CUST2)

Policy/management systems for preserving customer health and safety during use of products (CUST3)

Standards and voluntary codes for advertising (CUST4)

Commitment to quality through a well-developed, company-wide quality program (CUST5)

Commitment to industry research and development and innovation (CUST6)

Direct involvement in providing products to the economically disadvantaged (CUST7)

Constitutional reference for shareholders’ participation in decision making and access to all relevant information (INV1)

Provision of all required information to credit rating agencies (INV2)

Investor grievances handling policies (INV3)

Rules to strengthen auditor independence (INV4)

Regulatory mechanisms for prohibiting insider trading (INV5)

Commitment to reporting on financial and non-financial issues (INV6)

Policies and procedures for engaging in wide range of stakeholder-dialogs (INV7)

Policy for contribution of skills and time of employees for community services (COMM1)

Observes, both directly and indirectly, all relevant local laws and regulations (COMM2)

Helps community through charitable donations, and educational and cultural contributions (COMM3)

Supports for third party social and sustainable development related initiatives (COMM4)

Supports educational programs for the promotion of corporate citizenship (COMM5)

Supports public policies and practices to promote human development and democracy (COMM6)

Pursues partnerships with community organizations, government agencies and other industry groups dedicated to social causes (COMM7)

Prohibits child labor, and violation of human rights (COMM8)

Makes timely payment of taxes (COMM9)

Policy for dealing with a country that systematically violates human rights (COMM10)

Policy for social accountability or sustainable reporting (COMM11)

Code of conduct with regard to bribery, gift receipts and corruption (COMM12)

Explicit definition of environmental policy and long-term environmental plans (ENV1)

Well defined environment responsibilities (ENV2)

Systems for measuring and assessing environmental performance (ENV3)

Environmental emergency plans (ENV4)

Policies for substitution of polluting and materials and conservation of virgin materials (ENV5)

Designs facilitating reduction of resource consumption and waste generation during production, distribution and product usage (ENV6)

Preference for green products in purchasing (ENV7)

Natural environment training for employees (ENV8)

Selection of cleaner transportation methods (ENV9)

Responsible disposal of waste and residues, and recuperation and recycling systems (ENV10)

Emission filters and end of-pipe controls (ENV11)

Process design for reducing energy and natural resources consumption in operations (ENV12)

Production planning reducing energy and natural resources consumption in operations (ENV13)

Regular voluntary information about environmental management to stakeholders (ENV14)

Policies for preventing direct and indirect pollution of soil, water, and air (ENV15)

Systems and techniques for producing environmentally safe products (ENV16)

Mechanism for supporting research and development of environmental technologies (ENV17)

Inspection of supplier facilities for health, safety, and environmental aspects (SUPP1)

Policy to ensure ethical and friendly procurement at suppliers’ place (SUPP2)

Policy to pay and receive competitive market prices timely to/from the supplier (SUPP3)

Policy on restrictions on the use of child labor, sweatshop and violation of human rights at the supplier’s place (SUPP4)

Policy for social accountability or sustainable reporting by the supplier (SUPP5)

Indicate the relative position of your company with respect to the industry for each of the following statements. 1—Well Below Average; 2—Below Average; 3—Average; 4—Above Average; and 5—Well Above Average

Sales Growth Rate (FIND1), Market Share (IND1), Operating Profits (FIND2), Workplace Relations (IND2), Cash Flow from Operations (FIND3), New Product Development (IND3), Market Development (IND4), Research and Development (IND5), Personnel Development (IND6), Employee Health and Safety (IND7)

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Aggarwal, A., Joshi, N.A. Impact of CSR Activities Towards Different Stakeholders on Indian Firms’ Performance. Corp Reputation Rev (2024). https://doi.org/10.1057/s41299-023-00174-y

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