Corporate social responsibility, or CSR, is a concept that seems to float in and out of the public’s consciousness. At its most fundamental level, CSR policies call for companies to advance the public’s interest as well as their own profits. The practice—or lack of—socially responsible principles has placed large businesses such as Exxon Mobil Corp. and Nike Inc. in the ethical spotlight, and CSR is a concern expected to gain momentum in policy debates under U. S. President Barack Obama, who seeks to expand the economic “safety net” that protects both American citizens and workers abroad.

Knowledge@Emory spoke with Jagdish Sheth, a corporate strategist and chaired professor of marketing at Emory University's Goizueta Business School, about how companies can score points with consumers by incorporating CSR in corporate strategy.

Knowledge@Emory: Corporate social responsibility appeared to burst into public awareness around 1989, when the Exxon Corp (now Exxon Mobil) tanker Exxon Valdez ran aground in Alaska and spilled approximately 11 million gallons of oil into Prince William Sound. Does that mark the beginning of CSR?

Sheth: Actually, some form of CSR has been around for more than a century, particularly as society transformed from a feudal agricultural society to an industrial one. In the U.S., business barons like the Carnegie, Mellon and Rockefeller families made significant contributions to public works projects. In Europe too, Swedish industrialist Alfred Nobel, who developed dynamite, also established the Nobel Prizes to recognize people who made intellectual and other scientific breakthroughs.

Knowledge@Emory: So these and other entrepreneurs were all good-hearted businessmen?

Sheth: Not necessarily. There were periodic outcries over the wealth these people had amassed, and giving something back to the public was a way to deflect some of the criticism. They could say, “Look, we’re distributing profits back to the community at large through some type of CSR.”

Also, some controversial companies [Nobel, for example, was criticized in some quarters as “the merchant of death” for inventing dynamite] engaged in CSR as a way to pay back society for the damage that may have occurred as a byproduct of their business. Corporate social responsibility efforts may in part be aimed at placating both government regulators and society.

Knowledge@Emory: Is that still the case today?

Sheth: Not as much. For one thing, CSR has historically ebbed and flowed. When business institutions came under fire, the natural impulse of executives was to increase their CSR efforts. Then, when the crisis was over, the CSR activities typically ebbed. We saw a huge CSR effort among oil companies after the energy crisis of the early 1970s. The oil companies generated big profits, and when an outcry arose, they took to running print and other commercials explaining their positions and cranking up their charitable and other CSR efforts. Also, CSR efforts are typically mounted by large companies, which not only have the necessary financial and other resources, but are also much more likely to be noticed by society and by regulators. For smaller companies, CSR can be a nice way to enhance reputation, but it’s typically not as necessary. In fact, one of the best examples of CSR was by the Bell System when it was organized as a regulated monopoly. As part of its efforts to convince regulators to maintain its privileged position, the company encouraged its employees to get deeply involved in their local communities, and it also gave financial and other support to those communities.

Knowledge@Emory: You’ve noted that CSR activity tends to spike during a time of controversy. Yet many oil companies, for example, have maintained their efforts at CSR even during periods of falling energy prices.

Sheth: Big oil companies may highlight their commitment to environmental causes as a way to deflect attention from their drilling activities, and Nike, along with other apparel manufacturers, may focus on their commitment to ensuring their overseas suppliers treat local workers fairly, but for many others CSR is a kind of strategic philanthropy designed to help their businesses’ long-term growth.

Knowledge@Emory: Could you offer an example of this?

Sheth: Microsoft Corp. is very involved in educational initiatives. But besides benefitting society, the efforts also benefit Microsoft, since it ensures more people grow up with the company’s products and are likely to choose them later in life. The same is true of Apple. Furthermore, an educated population is more likely to be computer savvy, and also provides Microsoft with a larger pool of potential employees. Similarly, Google is involved with socially responsible efforts that may ultimately impact its user base. So a socially responsible strategy can also benefit a firm’s bottom line.

Knowledge@Emory: How active does a socially responsible company need to be? Does it have to engage directly in charitable or socially beneficial acts, or can it align itself with organizations that actually engage in the activities?

Sheth: A strong, meaningful link to positive causes may help a company be perceived of as a socially responsive firm. So contributing significant funds to organizations that help disabled children, for example, or that engage in cancer and other research, can help to polish a company’s CSR credentials. In marketing, we call this “credibility by association.”

Knowledge@Emory: Are there potential drawbacks to CSR? For example, a company’s efforts may generate great publicity, but doesn’t that place it under a spotlight that can also magnify any errors?

Sheth: That is correct. You can neither manufacture reputation nor buy it; you must earn it. Think about United Way, the charitable organization that has had more than one CEO criticized for lavish pay packages and expense accounts. United Way is still struggling to repair its reputation. Also, a company has to think carefully about what kinds of causes and spokespeople it should associate with. Think about the controversy earlier this year that swirled around Olympic gold medal swimmer Michael Phelps, following the appearance of photos linking him to marijuana. He quickly became a liability and lost some of his advertising contracts.

Knowledge@Emory: What about the credibility of companies that tout their socially active efforts? Do they have to be careful to make meaningful contributions, rather than simply to spin their strategy as CSR-oriented when in fact it’s a stretch to position it that way? Some car companies, for example, are saying they’re helping to save the Earth with hybrid fuel-efficient cars. Couldn’t one argue that they’re also responding to consumer concerns about fluctuating gas prices, especially in a down economy?

Sheth: That should be a concern. A genuine commitment to corporate social responsibility can be an enormously cost-effective way to market a company. But it can also boomerang because consumers can quickly turn against a company that’s seen as trying to sell itself as a responsible neighbor but is in fact making a minimal impact with its efforts. In one of my books, Firms of Endearment, I argued that a stand-alone CSR effort will generally not have the same positive effect as a CSR strategy that is embedded in a company’s operations. When employees and management believe in corporate social responsibility and make it part of their profit system, it’s much more likely to succeed. In this respect, an effective CSR strategy is like Pranayama Yoga, or the art of breathing control. When you take in oxygen in a haphazard manner, not all of the body’s cells will be properly nourished. But when you studiously control your breathing, and integrate into your total approach, all of the body’s cells will benefit from each intake and exhale of breath.