The COVID-19 pandemic and corporate social responsibility of Korean global firms: from the perspective of stakeholder theory

Introduction

The ongoing coronavirus disease 2019 (COVID-19) pandemic has caused a serious economic downturn and countless social problems and losses worldwide. This global crisis has put individuals and companies at risk, pushing numerous low-income earners and small-business owners to the verge of bankruptcy. According to the Organization for Economic Co-operation and Development (OECD) (2020), the gross domestic product (GDP) in South Korea fell 3.3% in the second quarter of 2020, which reduced the employment rate by 1.3%, particularly in the wholesale, retail trade, accommodation, and food sectors, and small business owners in general. Facing the economic risks of COVID-19, the Korean government has taken prompt and proactive measures to alleviate the economic problems at hand. Initially, the government measures appeared to be successful ( Lim et al., 2021; Shin & Lee, 2020). However, increases in continuing and evolving cases of coronavirus variants have rendered the actions taken by the government futile; it has had to ask for support from the private sector. Although COVID-19 has affected the business activities of large enterprises, their social engagement is required during the emergencies caused by this national disaster, considering their enormous economic, social, and environmental impact on society and, accordingly, an increase in social expectations about their roles ( García-Sánchez & García-Sánchez, 2020; Mahmud et al., 2021). Large enterprises may be more capable of disaster management than governments since they are systematically structured and have resources that can be mobilized promptly ( Ballesteros et al., 2017; Johnson et al., 2011). Utilizing such resources and dynamic capabilities ( Teece, 2007), they can effectively capture social needs and expectations and satisfy them efficiently.

Stakeholder theory ( Freeman, 1984) clarifies why companies have to take a voluntary and strategic approach to implementing their corporate social responsibility (CSR) activities. Stakeholders defined as ‘‘those groups who can affect or are affected by the achievement of an organization’s purpose’’ ( Freeman, 1984, p. 49) are important participants in companies’ business activities; thus, satisfying their expectations is directly related to the achievement of a business’s goals. Companies gain financial and nonfinancial benefits from fulfilling their economic, social, legal, and environmental obligations, and such fulfillment is expected from their stakeholders ( Farooq et al., 2017; Kim, 2015; Orlitzky et al., 2003). This suggests that companies have to clearly define their primary stakeholders and take a strategic approach to CSR activities to meet their expectations.

Companies have to design their CSR strategies, which should be aligned with their business strategies ( Galbreath, 2009; Nave & Ferreira, 2019). This is also true of companies’ disaster-relief CSR activities. Madsen and Rodgers (2015) argued that companies’ disaster-relief CSR activities can lead to improved corporate performance only when these initiatives draw the attention of and gain legitimacy from their target stakeholders. This implies that companies’ CSR activities in the crisis of a disaster should be strategically designed to meet their primary stakeholders’ expectations, and the activities should be properly communicated with target stakeholders to ensure the sustainability of their current and future business successes.

Building on stakeholder theory and the strategic significance of CSR during disasters, this study intends to illuminate the strategic choices and directions of Korean global firms regarding their disaster-relief CSR activities in the age of COVID–19. By investigating the CSR activities of Korean global firms before and after the COVID-19 outbreak, this study intends to clarify their defined social roles and positions in society and the strategic CSR approaches implemented during the COVID-19 crisis. The study illustrates how companies behaved during this crisis and identifies the CSR approaches they should adopt to increase their stakeholders’ awareness of their CSR activities and gain social capitals, which will ultimately influence their future business successes.

Corporate social responsibility (CSR)

CSR refers to “actions on the part of the firm that appear to advance or acquiesce in the promotion of some social good, beyond the immediate interests of the firm and its shareholders and beyond that which is required by law” ( Waldman et al., 2006, p. 1703). As one of companies’ main activities, CSR initiatives have been highlighted and studied in various business disciplines ( Nave & Ferreira, 2019; McWilliams & Siegel, 2001). Grounded in stakeholder theory ( Freeman, 1984; Parmar et al., 2010), the concept of CSR underscores companies’ responsibilities toward their stakeholders. That is, companies are expected to implement the expected obligations of their internal and external stakeholders, including customers, employees, partners, a community, and governmental and non-governmental organizations. CSR extends the boundaries of a company’s economic responsibility to include legal, ethical, and discretionary responsibilities ( Carroll, 1979). In line with this, researchers have argued that companies should be like citizens ( Moon et al., 2005) and that companies’ CSR activities should not be restricted to narrowly defined activities, such as voluntary donations or the display of concern for social and environmental problems, by supporting interest groups. Rather, they must be organized systemically and strategically to create social benefits, which can produce business benefits by achieving their business competitiveness ( Bernal‐Conesa et al., 2017; McWilliams & Siegel, 2011).

CSR activities add financial and nonfinancial value to companies ( Buchanan et al., 2018; Fombrun & Shanley, 1990; Servaes & Tamayo, 2013). Active involvement in CSR activities raises companies’ reputations and, thus, customers’ willing to purchase the product or service provided by socially responsible companies and show loyalty to their brands, which improves their financial performance ( Fombrun & Shanley, 1990; Orlitzky et al., 2003). Also, CSR is effective to companies internally by influencing their current and future employees. An empirical test conducted by Farooq et al. (2017) showed that CSR contributes to the shaping of employees’ organizational identification, which results in improving positive work outcomes, such as the internally- and externally-focused citizenship behaviors. Another study found that younger generations are aware of social issues, and they are attracted to socially responsible companies, which implies that such companies have higher possibility of finding and recruiting talent ( Alonso‐Almeida & Llach, 2019). As such, CSR and a company’s performance are closely and positively associated ( Alonso‐Almeida & Llach, 2019; Farooq et al., 2017; Kim, 2015; Orlitzky et al., 2003).

Companies need to take a strategic approach in implementing CSR, not only because of the expected positive values of CSR but also because of its increasing social regulations and expectations. This suggests a necessity to set a clear CSR vision and direction in companies. The CSR direction should be established strategically by the alignment with the business strategy of companies, which contributes to achieving their market growth and sustainable business. As argued in previous studies, companies can benefit from their strategically devised CSR plans and activities ( Bernal‐Conesa et al., 2017; McWilliams & Siegel, 2001; Siegel & Vitaliano, 2007). CSR endeavors should be incorporated into daily business activities as part of an enterprise’s business strategy ( Galbreath, 2009; Nave & Ferreira, 2019; Orlitzky et al., 2003). Companies’ CSR strategies, incorporated with their business strategies, improve product quality and processes through innovation, which can be differentiated by competing companies; thus, they can heighten reputation assets and gain a sustainable competitive advantage.

CSR in disasters

Disaster-related emergency management is considered as a domain that governmental organizations have to deal with ( Ballesteros et al., 2017; Johnson et al., 2011). However, doubts have been raised about the effectiveness of disaster management by governmental organizations ( Edwards, 2007). Researchers have argued that governments are incapable of executing disaster management effectively because of their lack of capabilities in leadership and collaborative efforts, and their rigid organizational structures which delay prompt implementation of some rescuing measures ( Kusumasari et al., 2010; Neal & Phillips, 1995; Waugh & Streib, 2006). This government incapability calls for more active involvement from the private sector in disaster relief, and their engagement in society has become more common and important ( Johnson et al., 2011; McKnight & Linnenluecke, 2016).

During disasters, overall society and local communities have emergent needs and require prompt assistance for a full recovery. Contrary to governmental organizations, companies have the capacity and resources to promptly and systemically mobilize; thus, they can be especially effective in executing disaster relief and recovery management ( Ballesteros et al., 2017; McKnight & Linnenluecke, 2016). Companies participate in various relief- and recovery-related CSR activities during disasters, and their activities are broadly implemented to satisfy stakeholders’ needs. Such implementation ranges from responsive and episodic-based measures to proactive activities, such as raising funds and partnering with relevant organizations in disaster relief ( Johnson et al., 2011). Given the emergent situations that arise during disasters, companies’ disaster relief CSR activities have particular importance to society, benefiting many people and local communities in need ( Ballesteros et al., 2017; Johnson et al., 2011; McKnight & Linnenluecke, 2016).

Engaging in disaster-relief CSR activities can be challenging for companies because they generally require some revision to existing CSR plans and a reconfiguration of resource allocation otherwise directed to their original CSR activities. Nevertheless, given the emergency nature of disasters and the subsequent pressing social needs and expectations, companies are duty bound to respond to these events ( Edwards, 2007; Johnson et al., 2011; McKnight & Linnenluecke, 2016). As illustrated in the previous section, because companies can benefit from planned strategic CSR activities, a proactive and systemic approach should be devised and implemented, even during disasters. Companies should therefore design target-specific and strategic CSR activities during disasters, as these activities will increase social values and awareness of the enterprises in society; this could ultimately support their long-term business ( Johnson et al., 2011; Madsen & Rodgers, 2015).

CSR and COVID-19

Studies have indicated that business sectors around the world are actively participating in relief and recovery activities necessitated by the COVID-19 pandemic; this participation has taken the immediate and appropriate form responding to social and stakeholder needs ( García-Sánchez & García-Sánchez, 2020; Mahmud et al., 2021). For instance, U.S. companies with esteemed CSR reputations are carrying out various CSR activities that focus on building stewardship relations with employees, customers, and communities ( Mahmud et al., 2021). In Spain, companies are demonstrating their commitments to society through various types of CSR practices that entail economic and legal responsibilities, as well as commercial, ethical, and altruistic CSR approaches ( García-Sánchez & García-Sánchez, 2020).

As illustrated above, large enterprises’ social participation is distinctive during the COVID-19 pandemic. They are responding to the various emergent social needs actively to overcome the complex risks surrounding this pandemic. Although most businesses are challenged by COVID-19, they have continued to reach out to society and show citizenship behaviors ( García-Sánchez & García-Sánchez, 2020; Mahmud et al., 2021). These companies have both voluntarily and purposefully implemented these endeavors. The high public awareness of large enterprises makes them feel obligated to implement CSR activities and be recognized as good corporate citizens in society ( Servaes & Tamayo, 2013). They believe that involvement in CSR activities during difficult times is not only expected from the society but is also a useful foundation from which to obtain positive business outcomes in the future ( Farooq et al., 2017; Johnson et al., 2011). This implies the particular meaning and importance of strategic CSR initiatives during disasters in relation to companies’ business continuity.

In Korea, the first case of pneumonia induced by COVID-19 was detected on January 20, 2020. Despite the initial systemic preventive measures taken by the Korean government ( Lim et al., 2021; Moradi & Vaezi, 2020; Shin & Lee, 2020), over 80,000 cases have since been confirmed, with the case fatality rate reaching 1.8% in February 2021. This pandemic has left society in a panic, generating enormous economic and social losses. To mitigate these losses and recover from economic and social risks, countrywide cooperation in every sector and at every level has been solicited ( OECD, 2020). Responding to the call, enterprises in the private sector, particularly large companies, participated in this disaster-relief. They found areas that need support and conducted various rescuing CSR activities to reduce the harm derived from the pandemic.

In South Korea, large enterprises are closely related to the government, building economically and socially close relationships ( Chang, 1988; Le et al., 2016). They were a driving force of remarkable economic growth in South Korea and also, they have involved tackling economic and social issues. The attribute of emergency and broad coverage of disasters requires the Korean government to have close and open partnerships with large enterprises ( Bang & Kim, 2016; Park & Chung, 2021). Accordingly, large companies cooperate with the Korean government and are actively involved in society to tackle various social and environmental problems. Their engagement in society was manifested during the COVID-19 pandemic. Correspondingly, this study noted Korean large enterprises’ CSR activities and strategies during the COVID-19 pandemic by investigating three representative Korean companies.

Methods

Results

A total of 167 news reports were chosen: 50 news reports (24 and 26 news reports one year before and after January 2020, respectively) from Samsung Electronics; 57 news reports (31 and 26 news reports one year before and after January 2020, respectively) from LG; and 60 (32 and 28 news reports one year before and after January 2020, respectively) from Hyundai Motors ( Kim, 2022).

Discussion

In summary, the findings show how the target Korean firms have been involved in society during the COVID-19 pandemic. Although the companies differ in their overall CSR visions, primary stakeholders, and main activities, their CSR activities during the pandemic are both responsive and systematic. The CSR activities are in line with their overall CSR strategies and the companies reached communities promptly by adding responsive CSR activities. The companies have implemented various disaster-relief CSR activities by finding local communities and people in need and engaging with them promptly and proactively. Since the spread of COVID-19, these companies have participated in and supported society by sharing their resources and capabilities. They have implemented philanthropic activities, such as donations, the provision of facilities and supplies (e.g., masks, and their own products), and they have raised awareness of the risks stemming from COVID-19 through campaigns, and educational programs to support local communities in urgent need and also those who are socially disadvantaged. They have also shared a code of conduct for prevention and have built partnerships with government and nongovernmental organizations. These disaster-relief CSR activities highlight their roles as good corporate citizens by voluntarily engaging with communities during disasters.

Besides these prompt and discretionary CSR activities, these companies have implemented the primary CSR activities that they had focused on before the pandemic. Specifically, Samsung Electronics’ main CSR initiative is directed toward its CSR vision of cultivating future generations. The company recognized the social problems that younger generations face, such as financial difficulties, unequal educational opportunities, bullying in school, and cyberbullying. Samsung Electronics has been engaged in solving these social problems by developing projects and raising funds. Examples of these projects are the Hope Stepping Stone project ⁴ for teens, programs for orphans who need shelter and financial support for self-reliance, the Blue Tree Foundation ⁵, which is aimed at resolving school bullying, and Blue Elephant ⁶ which is intended to tackle cyberbullying. The company’s CSR activities have progressed systematically nationwide. Samsung Electronics’ efforts and investments represent its strategic CSR intention of ensuring a bright future for younger generations who will be the company’s potential future employees and customers. By engaging with the target stakeholders as supporters and problem solvers, Samsung Electronics have raised brand awareness among them, which is expected to lead even more business success.

LG’s main CSR activities indicate a focus on value creation for target stakeholders, including suppliers, communities, and employees. With an orientation toward win-win situations and partnerships, LG actively has supported its suppliers by implementing various assistance and collaboration programs. The company has been also actively engaged in providing ‘untact’ ⁷ products and services in support of the government policy of social distancing after the breakout of COVID-19. By providing AI CLOi robots to employees and communities during the pandemic, LG has intended to raise awareness of its brand in the market of ‘untact’ business while doing good for society. These CSR endeavors clearly show the intended strategies through which they have utilized this social challenge as business opportunities. The main characteristic of LG’s disaster-relief CSR activities is that they have been implemented company-wide. As shown in Table 2, ‘executives and employees’ and ‘donate’ were highly ranked keywords. The relevant news reports indicate that all LG employees joined CSR activities by volunteering and donating money and products. This approach has raised employees’ awareness of the company’s CSR activities, which would possibly contribute to increasing their identification with LG.

The primary CSR initiatives taken by Hyundai Motors reflect its care for a community with the vision of contributing to human lives. In line with its business of mobility, the company has been involved mainly in projects concerning safety, the environment, and safety-related education. Under the main CSR initiatives of mobility, safety, and an environment for humanity, the company has initiated various campaigns and projects during the pandemic and conveyed its efforts to care for the environment and a community to improve human life in a healthy and safe manner. Aligned with their core business, such CSR activities easily have raised stakeholders’ awareness due to the close association of CSR initiatives with the automotive business. Also, their CSR activities have been implemented mainly via building partnerships with relevant governmental and non-governmental organizations. This approach is strategic and systematic, as the company is able to promptly achieve the intended goals of its CSR activities by collaborating with parties whose resources and capabilities could easily be mobilized for disaster relief.

These companies have continually implemented their primary CSR activities under their CSR visions and initiatives. The findings illuminate that companies benefit communities and society by effectively and systemically implementing strategic disaster relief CSR activities aligned with their CSR initiatives. Capturing and promptly responding to the needs of their target stakeholders in various philanthropic ways, the companies strategically used and allocated their resources and capabilities, which contributed to raising their stakeholders’ awareness of their CSR activities and increasing their legitimacy ( Madsen & Rodgers, 2015). The findings confirm that these Korean firms are broadly involved with society, reaching out to and benefiting the target stakeholders through their strategic disaster-relief CSR activities. This lends support to the argument that the business sector performs effectively in disaster management due to its systemic organizational structures and governance, and its dynamic capability to mobilize and combine resources ( Ballesteros et al., 2017; Johnson et al., 2011).

Conclusion

The COVID-19 pandemic, an unprecedented disaster, has left the world in chaos. During this disaster, more active and responsible actions from the business sector have been required. Companies’ systemic CSR activities during the disaster benefit their businesses by increasing stakeholders’ awareness of the CSR activities and, accordingly, increasing trusts toward companies and their reputation, which finally contributes to achieve business sustainability ( Madsen & Rodgers, 2015; Qiu et al., 2021). In this study, the target companies implemented consistent and strategic CSR activities and this strategic approach implies their intention to leverage the risks surrounding COVID-19 as opportunities for their future sustainable businesses. The finding also suggests the Korean large enterprises’ important role as rescuers who can solve the economic and social problems that the COVID-19 pandemic have caused.

This study highlights that companies should maintain a stakeholder- and community-centric view when designing their CSR plans. Companies’ CSR strategies should be incorporated into their business strategies, and they should be improved and evolve corresponding to the anticipations of social needs and expectations. Such an agile and systemic approach to businesses’ CSR activities will benefit society, contributing to creating social values and sustained coprosperity with society.

The motive of companies’ CSR activities has been argued to be mainly self-serving, ultimately pursuing certain economic benefits ( Crane & Matten, 2020); however, the study finding suggests that CSR activities are not just for their own interests but rather for common economic and social benefits, with a good and genuine motive. The companies in the investigation showed that they consistently implemented CSR activities designed in alignment with their CSR visions and goals during the pandemic, and they also reached out to and engaged in society with prompt philanthropic CSR activities.

As argued by researchers ( Johnson et al., 2011; McKnight & Linnenluecke, 2016), the role of the private sector is important and effective during disasters. Their business capabilities of resources and experiences, as well as the systematic mobilization and transformation of resources, can fill in the area that government alone cannot cover. Therefore, the private sector’s open and collaborative partnership with the government is required during a disaster ( Bang & Kim, 2016; Park & Chung, 2021), and such collaboration can have synergic effect on community building, recovering from the disaster.

Data availability

Publisher’s note

This article was originally published on the Emerald Open Research platform hosted by F1000, under the ℈Responsible Management℉ gateway.

The original DOI of the article was 10.35241/emeraldopenres.14511.1

Funding statement

The author(s) declared that no grants were involved in supporting this work.

Competing interests

No competing interests were disclosed.

Reviewer response for version 1

Reviewer response for version 1