How corporate social responsibility and competition interact

With the second Donald Trump administration rolling back both diversity, equity and inclusion (DEI) and climate policies in the US, and many big companies falling into line, what is likely to be the broader trend in the 2020s and beyond for corporate social responsibility (CSR) in the US and globally? 

And what effect will the reactions of various stakeholders – government, investment markets and the media – have on these CSR trends? 

Research by Christopher Marquis, Sinyi Professor of Chinese Management at Cambridge Judge Business School, sheds some light on this topic through a granular examination of the effect of stakeholders on companies’ CSR efforts. 

Looking beyond financial metrics to assess corporate responsibility trends 

“There must be thousands of studies on how CSR affects the financial performance of companies, and the results have been inconsistent. And the fact that there are thousands of studies tells me something is not quite right with the literature and its obsession with attempting to justifying everything financially. That the same general topic keeps being studied again and again also raises questions about the motivation of many of the researchers,” says Christopher. 

“So in my work on the topic, I have tried to examine what leads to more or less CSR (or sustainability), which can then help understand what future trends may be.” 

Rather than treating stakeholders as just one entity, Christopher’s research instead examines the different assessments of various stakeholder groups, and conflicting interests within those groups, to identify how different types of stakeholders view CSR.  

And while it’s difficult to predict what may happen during the 4 years of Trump’s second term and beyond, Christopher has some broad observations about how CSR trends may play out over time. 

Dormant but resilient: the enduring commitment to corporate social responsibility 

“You have seen that a lot of companies have backtracked in their prior commitments, so I think that there will be pullback over the next few years on CSR commitment and initiatives,” he says. “But I have seen in my research over 20 years now that there is a deep well of interest in social responsibility – be it climate or diversity or other areas – and this interest is widespread across a large number of constituencies. 

“So in the short term there will be less pressure for CSR, but I think there’s a depth of commitment to these topics – so it may be dormant or in hibernation, but I think these initiatives will come back, and hopefully before 4 years.” 

On the topic of organisational dormancy during times of political change, Christopher points to a study by a former student of his, Rajiv Krishnan Kozhikode, who now teaches at Simon Fraser University in Canada. The study published in the journal Organization Science outlines how policies are often later reversed through “predictable political cycles”. 

Focusing on branch expansion of commercial banks in India, the research finds that some organisations strategically adopt a temporary reduction in certain activities in response to a detrimental public policy, and “maintain this inactivity until a favourable public policy returns” – which often rewards this step-back-for-now strategy. 

“Organisational dormancy is a viable response to detrimental policy changes that are perceived to be potentially temporary,” says the bank research, which challenges assumptions that corporate public policy changes related to politics are enduring.  

While that study focused on bank expansion, Christopher says the findings resonate with his research on CSR and is what he predicts will happen following Trump’s tenure. He notes that this is not an “invitation to not do anything for the next 4 years” and that it is important for individuals and stakeholders “to keep pressure on companies to act in the public interest.” 

Tension and trade-off between benefits and costs of corporate social responsibility 

Broadly, companies facing pressure from competitive conditions aim to sustain their advantage through one of 2 strategies: lowering prices through cost control and exploiting economies of scale, or product differentiation to create unique customer value that builds loyalty that can command premium prices.  

The same tension and trade-off between benefits and costs exists with CSR: firms can devote greater focus and resources to diversity, sustainability and other CSR goals to differentiate themselves from rivals, or reduce CSR activities such as diversity recruiting initiatives to save costs. 

The study focuses on 1,677 privately controlled Chinese companies listed on the Shanghai or Shenzhen stock exchanges from 2008 to 2017. CSR ratings were compiled from rating agency Runling, also known by the English acronym RKS, which created a 70-indicator rating system to examine the CSR behaviour outlined in the firms’ CSR reports.  

Christopher believes that the findings, published in the Journal of Business Ethics, are broadly generalisable to other markets where competition exists. 

How competitive advantage reflects stakeholder attention to corporate social responsibility 

“While prior studies have explored the impact of corporate attention to stakeholders on firms’ decision-making, they have overlooked the role of stakeholder attention” – and such attention is critical to how firms deal with the trade-off between the benefits and costs of CSR activities. 

Put simply, “competitive advantage from CSR differentiation is contingent on the level of firm attention by stakeholders who reward CSR”, says the research, which develops a new framework based on the argument that companies contemplating CSR consider the trade-off between the benefits and costs of different possible programs.  

“Existing studies have mainly focused on the role of corporate characteristics such as product features, consumer diversity and firm-level strategy, while ignoring the features of external stakeholders,” says the study. Further, much previous CSR research has examined non-shareholder stakeholders as a combined entity – “assuming that customers, suppliers, employees, the community, governments and other stakeholders share a similar utility function”, while Christopher’s research focuses on “the extent to which stakeholders’ utility functions may vary.” 

This is important, says Christopher, because while there has been a lot of discussion about whether people care about CSR, there has been little examination about variation between different constituencies – and such nuances matter. 

The attentional roles of governments, investors and media on CSR 

Specifically, the research explores attention toward CSR from 3 different types of stakeholders: government, investment markets and media. 

Government is a particularly relevant stakeholder in China. The study finds that the positive effect of political market competition on CSR behaviour is stronger for firms in sectors that receive greater central government attention, and weaker for firms in industries that receive greater local government attention – which reflects the ”hierarchical and relatively autonomous relationship between the central government and lower-level governments such as a province or city.” 

Regarding investment market attention, the research finds greater positive effect of political market competition on CSR behaviour for firms that receive greater attention from investment market stakeholders, and this is stronger when the attention is from such stakeholders who more appreciative of CSR such as long-term institutional investors and female financial analysts. 

There have been several previous studies that find that females tend to be more concerned about companies’ CSR behaviour. These include an earlier study by Christopher, in Strategic Management Journal, which found that female directors of companies are more likely to engage in philanthropic activities, which are often related to CSR-focused issues. 

As for media attention, the research finds that the positive effect of  political market competition on CSR behaviour is stronger for companies that receive greater media attention, suggesting an opportunity for firms with media attention to attract public support through CSR behaviour. 

The research includes data based on articles in eight mainstream financial newspapers commonly used in academic research on China: China Securities Journal, Shanghai Securities News, China Business News, 21st Century Business Herald, China Business Journal, Economic Observer, Securities Daily, and Securities Times. 

Disinformation and the challenge of stakeholder attention in the digital age 

Christopher’s research also focuses on disinformation, the subject of the second Cambridge Disinformation Summit in April 2025, pointing out that stakeholders’ attention is limited and can be manipulated. 

“In the digital era, both managers and stakeholders should be attentive to the role of information intermediaries in the transmission of information concerning ethical issues, such as information intermediaries’ motivations and orientations,” the study says.