TITLE:
Corporate Social Responsibility from the Viewpoint of Social Risk
AUTHORS:
Maria Teresa Bosch-Badia, Joan Montllor-Serrats, Maria Antonia Tarrazon-Rodon
KEYWORDS:
Corporate Social Responsibility, Social Risk, Corporate Reputation, Corporate Social Image
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.8,
October
8,
2014
ABSTRACT: This paper studies Corporate Social
Responsibility (CSR) from the viewpoint of social risk as part of reputational
risk. We adopt the conception of social risk that includes the risks originated
by environmental and social sustainability. Any risk involves hazards and
opportunities. The success of its management consists of hedging the hazards
and turning opportunities into value. CSR is the key for dealing with both
goals. Opportunities can be identified through an accurate analysis that leads
to discovering the unsatisfied needs contained in societal claims in general
and in the private politics of Non Governmental Organizations (NGO) in
particular. Bringing these opportunities into line with the corporate know-how
and undertaking projects together with the stakeholders with whom synergy is
possible enables corporations to create shared value. A direct hedging of
social risk hazards is hardly impossible. A good corporate social image
constitutes a sound hedging against social risk. We have associated to social
image the concept of CSR capital which means the value created through CSR. On
this basis, we analyze the meaning and implications of social failure using
Leland’s bankruptcy costs model. The quantification of the CSR capital may
parallel the quantification of reputational capital about which several papers
have been published. Combining the direct net present value created by a CSR
expense with its tax savings and the savings it produces in the present value
of the social failure costs, we estimate the total net present value created by
these expenses. The analysis of social failure costs and the value created by
social expenses is accompanied by a numerical illustration.