This chapter analyzes the academic debate regarding the need to adopt a long-term vision of CSR strategies. It's based on the premise that short run is the dominant approach in financial markets, and this situation could be negatively conditioning the long-term sustainability value creation. New social values may be requesting different management decisions from companies, prioritizing long-term over short term results. A thorough literature review has been done across specialized journals, international reports, and key legislation, trying to determine and model the elements facilitating this sustainable value creation. It shows the alignment needed between CEO and their shareholders within the framework of corporate governance to create long-term value within CSR. There are signs of a possible financial over-performance of companies that strategically create a shared value with stakeholders based on environmental, social, and governance objectives, selected due to their materiality. A model is proposed to consider a long-term approach creating sustainable value in organizations.
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More and more voices claim the need for a change in the way companies are managed. The call for change comes not only from economists (academia), but also from investors and business leaders, such as Larry Fink, which in his recent statements presented in his annual letters (Fink, 2018 and 2019) or even the document signed by 181 Chief Executive Officers (CEO) in the United States (Business Roundtable, 2019), redefines the purpose of corporations. These statements set out the need to incorporate a social purpose in organizations based on a long-term perspective, this is, going beyond serving shareholders to commitments to all stakeholders, promoting a sustainable economy serving all. According to the CEOs, the problem lies in investors, who must share the value generated with other stakeholders, in contrast, according to Fink, the issue lies in CEOs, who must establish strategies for generating financial and social value in the long term. Both apparently want to move forward using the same approach, but they criticize each other for their inaction, and stress inefficiencies in corporate governance (CG). It seems then, this could be the same problem leading to risky strategies aimed to obtaining short-term benefits during the last economic crisis, which ultimately, were opaque to the long-term global risks of the economy. Doing so, hindered the performance of financial institutions, and left their stakeholders (customers, shareholders, workers and society in general) exposed (Ellul, 2015).
Together with the high levels of indebtedness generated in the wake of the crisis, this markedly short-term perspective could be the reason for the current stagnation in investment, growing economic inequalities and a decline in trust in institutions and in CEOs (Barton, 2017; Fink, 2018). The acronym VUCA1, Volatility (V), Uncertainty (U), Complexity (C) and Ambiguity (A), which refers to general conditions and situations, could be adapted to this economic scenario; it is aggravated by individuals' bias towards short-termism, involving a tendency to avoid uncertainty (Friede, 2019), encouraging heavily diversified investors who are also focused on the short term.
The world is changing, as well as the beliefs and expectations of general stakeholders – beyond shareholders –, which have to be considered by the companies. Thus, new values should be integrated to corporate governance, business management and accounting. It is increasingly common to find examples illustrating this change of paradigm: During the recent COVID-19 crisis, pharmaceutical companies have been the object of harsh social questioning in relation to which stakeholder’s expectations should prioritize: profit maximization according to shareholder expectations, priority distribution of vaccines to the countries that have subsidized research, or attending the need to balance social inequalities and provide vaccines to developing countries. The different responses from pharmaceutical companies will generate diverse results in the short and in the long term, which probably will affect their reputation, access to future markets or institutional support, for example. In this context, shareholders could even request the introduction of new values into decision management. Corporate Social Responsibility (CSR) could be crucial in solving the problem, although its implementation is often criticized as being more cosmetic than real, and as often being banished to the area of communication, thereby rendering the information available on sustainability open to question and creating doubts around the capacity of CSR to improve the situation (Durand et al, 2019; Porter & Kramer, 2006; Friede, 2019). The problem could lie in the widespread opinion that sustainability is a serious obstacle to profitability, although this perception could also be related to the short-term perspective and to the problems of governance outlined above.
The Edelman Trust Barometer Global Report (Edelman, 2018), Barton (2017), Porter & Kramer (2011), Schoenmaker, & Schramade, (2019) and Sewchurran, et al. (2019) all agree that short-termism is a problem. From their own perspective, each suggests that if companies refocus towards the long term, this could provide a solution to this situation. As pointed out by authors such as Dou et al. (2017), they argue that a proactive environmental strategy as part of an ethical commitment would ease the long termism.