If You Are Not Serious About It, CSR Will Punish You

The pandemic caused by Covid-19 has led to a more sudden and committed change of pace in terms of Corporate Social Responsibility (CSR), as shown by some recent research in the United States, with more than 60% of Americans are hoping for an economy that is socially oriented and attentive to the environment. Globally, 9 out of 10 citizens wish to live in a more sustainable and equitable world after Covid-19, and expect a transformation in their lifestyle rather than a return to the past. This is a strong message, which the top management of large multinationals seem - at least in intentions - to share. The chief executive officers of large multinational companies, including Cisco Systems, IBM, Apple, Amazon, Walmart, JP Morgan Chase, General Motors, Boeing, have already demonstrated with a public declaration of intent that "there is no business if there is no ethics ", clarifying that the value produced cannot remain only for the benefit of the shareholders, but must be shared with the subjects who contribute to producing it: employees and customers, together with the whole company and the territory - that is, all the stakeholders.

As often happens in the presence of "shocks", the premises now seem to exist in favor of a profound change towards a business vision oriented towards sharing the value generated by business with civil society, individuals and the environment, as a key strategy for giving new life to an economy sorely tested by the pandemic. Government institutions at both national and international level also seem to go in this direction, and have identified - in the aid and recovery programs they are launching in recent months - "Green" and sustainable development as a fundamental pillar for investment policies.

We are therefore certainly facing a great opportunity: social, ethical and "environmentally friendly" businesses are an extraordinary challenge, the equally significant risks of which should not be forgotten. Evaluating the CSR and the real "dedication" of a company - beyond mere marketing activities - is not an easy task and hides many pitfalls, even for the companies themselves. Opportunistic and unethical behavior risks having a profound impact on the company as a whole, creating reputational damage.

In this sense, a useful indication comes from the economic-financial literature that has described, in general, corporate social responsibility (CSR) as a factor capable of improving the perception of the company on the market, thus considering it a driver of value. This is a hard-earned reputation premium that, if not respected, investors are no longer willing to pay. Of interest is what happens on the capital market in the case of communication by the companies of c.d. restatements - a fairly common event in American practice which consists in retrospectively "modifying" the financial data communicated in previous years. Such changes may be due to involuntary errors - or fraudulent managerial behavior. In the case of changes due to involuntary errors, companies with higher levels of CSR are penalized less by the market (CSR protects the company). If, however, the change to the financial data is substantiated by the effect of fraudulent managerial attitudes, the loss of trust generates a negative effect of greater intensity. These companies betray their ethical mandate and the very essence of CSR and are punished by the market which essentially sees an implicit pact with the company being broken: that of setting a good example.