Many companies view corporate social responsibility (CSR) as a way to generate ‘good will’ as well as ‘doing good’ for the environment or local communities, but the benefits of CSR for a company go beyond simply improving the reputation of a company – and could mean that consumers value products produced by those with active CSR activities more highly.
A new study published in the Journal of Consumer Research suggests that CSR projects and donations to charity have a significant impact on the way a consumer not only perceives a company but also its products.
"Corporate social responsibility can lead consumers to believe that the products of companies engaged in socially responsible activities are better performing,” wrote the authors, led by Alexander Chernev and Sean Blair from the Kellogg School of Management, at Northwestern University. “We attribute this to a 'benevolent halo effect' where positive attitudes toward a company translate into positive beliefs about the company's products.”
"Doing good can indeed translate into doing well,” they said. “Contrary to the popular view among many executives that corporate social responsibility is unlikely to benefit their company, our findings suggest that in addition to benefiting society, corporate social responsibility can contribute to a company's bottom line by improving consumer evaluations of their products.”
In four studies, the authors tested the impact of corporate social responsibility on consumer perceptions of product quality. In one study, consumers rated red wine as tasting better when told about a winery's charitable donation to the American Heart Association.
In other studies, consumers thought various products such as running shoes, tooth whiteners, and hair loss treatments performed better when told the companies donated to charity.
Don’t shout about your CSR
However, the observed halo effect was reduced when a company advertised its corporate social responsibility efforts.
Indeed, the team behind the research suggested that advertising may not be the best approach for companies to inform customers about their charitable activities – adding that social media and public relations may be more effective in convincing consumers of the compassionate nature of a company's actions, which thereby increases the positive impact of CSR and the perceived performance of a company's products.