Effects of Corporate Social Responsibility and Creating Shared Value on Sustainability

Introduction

In the old days, firms’ only responsibility was to maximize their owners’ interests and profit, rather than concerning about social and environmental effects. However, nowadays serious climate changes, environmental disasters, and malnutrition around the world have been emphasizing the criticism toward capitalism and business management (Abdelkafi & Täuscher, 2016). Debates about the firm’s responsibility for its economic, social and environmental impacts have also been raising (Motilewa et al., 2016). As a consequence, firms are requested to contribute to the achievement of holistic sustainable development, which not only refers to economic sustainability for firms, but also ecological and social sustainability. Business management should think and support the innovative solutions that deal with environmental and social challenges, while creating economic simultaneously (Abdelkafi & Täuscher, 2016). Sheth et al. (2011) suggest that the performance of business does not only depend on economic performance but also environmental and social performance. Therefore, managing the relationship between business and society has become one of the important topics of academic research, business and sustainability management (Wilson & Post, 2013). In addition, there have been studies arguing that the growth of businesses encourages the growth of economic, as businesses have become a major driver of society in terms of, for example, creating employment, providing transportation and health care systems (Motilewaet al., 2016). On the other hand, society also plays an influential role in achieving a firm’s economic performance i.e., making a profit (Lawrence & Weber, 2013; Motilewa et al., 2016).

Corporate Social Responsibility (CSR) refers to business management and operations that aim to enhance societal well-being (Jackson & Apostolakou, 2010). Traditional CSR has been associated with corporate philanthropy and could have used up the firm’ slack resources such as working hours of employees and financial capital (Wójcik, 2015). Its practice is mostly about sacrificing profits for the social interests. Therefore, the creating shared value (CSV) concept was introduced to address this issue by re-conceptualizing the role of business in the society and offering a theoretical solution through the prism of value. It can be considered as a corporate framework to guide the thinking about the relationship between a firm and society (Porter and Kramer, 2011). Social activities are linked to a firm’s goals, meaning that social and environmental responsibility is considered an internal function rather than external obligations. Nevertheless, it is difficult for businesses and academia to demonstrate how corporate responsibility could lead to improvements for the firms, society, and the environment (Camilleri, 2017). Many scholars have called for greater emphasis on value creation within the context of business responsibility (Wójcik, 2015). Socially responsible practices create value for the firm, it stakeholders including society and the environment (Camilleri 2017). Thus, firms should allocate and distribute corporate valuable resources and business capability that concern about social and environmental impacts (Camilleri, 2017; Porter and Kramer 2011). Competitive advantage and legitimacy related to social responsibility are important for firm’s survival and growth, which hinges on value co-creation process for sustainable development that meet pressures and expectations from the society (Ahen & Zettinig, 2015).