Why corporate social responsibility can backfire

Doing good can be good business, but research finds it can also trigger bad behavior

Credit: Dan Page

Alina Dizik | Jun 11, 2018

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Executives have long touted corporate social responsibility—anything from corporate donations granted on behalf of a company to designated days for employees to volunteer in local communities—as a way to attract and retain talent.

An employee participating in a charity 5K alongside colleagues may take pride in raising money for a good cause while strengthening bonds with coworkers. And investing in CSR allows companies to create lasting social and environmental change.

But as CSR has become ingrained in the workplace and even in some brands, researchers are finding drawbacks to how employees react to these initiatives.

Encouraging and even mandating employees to participate in charity runs or volunteer days can bring benefits—CSR may help to attract better quality employees and improve productivity, especially if the company is convincing in their genuine intent on doing good, according to University of Chicago’s John A. List—but his research also suggests that CSR can backfire, and companies need to understand why in order to manage it.

When CSR meets ‘moral licensing’

Investing in corporate social responsibility has a long history, says List. In the 19th century, British companies promoted social investments on the job to help improve their corporate image, and to battle internal unrest around poverty and poor working conditions. Investment in CSR initiatives has grown since then, especially since the 1990s, and CSR is still often seen as a marketing tool. Large companies can be especially vigilant about integrating environmental or social causes into business operations. More than 90 percent of the 250 largest global companies by revenue now publish detailed annual reports of their corporate-responsibility practices, according to KPMG’s 2017 survey of corporate-responsibility reporting.

corporate social responsibility

kȯr-p(ə-)rət \ ˈsō-shəl \ ri-ˌspän(t)-sə-ˈbi-lə-tē

Corporate initiatives that express responsibility for the company’s effects on the environment and society.

So what are the problems? For one thing, participating in a company’s CSR initiatives can lead to what researchers call moral self-licensing, where a positive action is offset by harmful behavior later on. In cases of moral licensing, company-sponsored social initiatives can trigger poor employee performance because doing good deeds in one area encourages the employee to behave unethically in another, according to research by List and University of Chicago postdoctoral scholar Fatemeh Momeni.

List and Momeni hired more than 3,000 gig workers through Amazon Mechanical Turk, a crowdsourcing marketplace, to complete transcription tasks. They paid workers part of their wages upfront, a decision made intentionally to encourage misbehavior. The researchers figured that some participants (who didn’t know they were part of a study), with payment in hand, would simply not do any work—or might cheat by reporting images for transcription as unreadable.

The idea of corporate responsibility was incorporated through messaging, some of which said the consultancy would donate cash to UNICEF’s education nonprofit. To trigger feelings of moral licensing, the researchers framed one group’s contribution as a donation “on behalf of the workers.” As a result, some workers more strongly identified with the company’s larger mission and felt their role was part of a prosocial act, one that would build social acceptance.

While the idea of work having a positive side benefit might have motivated some, the participants who read about this CSR effort were 20 percent more likely to act detrimentally toward the employer by either taking the upfront payment and not finishing the job, or reporting images for transcription as unreadable. The average intensity of cheating per worker also increased by 11 percent with CSR.

“We find the share of cheaters to be the highest when we frame CSR as a pro-social act on behalf of workers,” the researchers write. Framing CSR as an act that was carried out by the workers, but good for all, increased the number of cheaters by 30 percent compared to a control group. While CSR increased the quantity of cheating,  the quality of work wasn’t significantly affected.

When participants knew that their employer was donating to UNICEF and that their work was having a larger social impact, their self-image improved, and they felt morally licensed to engage in behavior that they would have otherwise considered unethical. When workers feel their good behavior benefits a charity, “CSR can improve workers’ self-image and license less ethical subsequent acts,” the researchers conclude.

In a second experiment involving temporary workers, List and Momeni tracked cheating behavior on MTurk, while they decreased hourly wages offered to two of the groups of workers and increased investment in CSR. In both groups, more workers cheated on the transcription work, and how much the researchers spent on CSR initiatives was directly related to cheating. When 5 percent of a wage was redirected to CSR, cheating increased by 25 percent. When 29 percent of the wage was substituted with CSR investment, cheating increased by 53 percent.

The trade-offs of eliciting good behavior

This moral licensing was also triggered by activity that is similar to CSR but more personalized. While CSR is typically a coordinated group activity, organizational citizenship behavior (OCB) is a similar but lesser-known concept conducted by an individual. Common organizational-citizenship behaviors in the workplace include helping an employee who has been absent catch up with work, showing concern for a coworker’s struggles, or adjusting a schedule to accommodate someone else.

Researchers find that employees who are motivated to do good deeds by a company and also practice OCB will experience a mental-licensing effect. And even when a company hasn’t organized a companywide social initiative, employees’ actions associated with OCB can still lead to drawbacks for companies, says National University of Singapore’s Sam Yam.

organizational citizenship behavior

ȯr-gə-nə-ˈzā-shnəl \ ˈsi-tə-zən-ˌship \ bi-ˈhā-vyər

An employee’s voluntary commitment that goes beyond her contractual, agreed-upon tasks.

He and three co-researchers—Oregon State University’s Anthony C. Klotz, Nanjing University’s Wei He, and University of Washington’s Scott J. Reynolds—observed moral licensing in cases where an employee’s good deeds were extrinsically rather than intrinsically motivated. Some employees reported doing good deeds only because of company pressure, being nice to a colleague, say, to avoid losing their jobs or being criticized in their roles.

But when a person did something to benefit her employer, it produced a feeling of entitlement that triggered a moral-licensing effect and eventually led to harmful behavior. For example, a worker might have, for the good of the company, spent one day helping a colleague who had been on vacation catch up with work. The next day that same worker may have felt entitled to take an extra break.

In experiments, Yam, Klotz, He, and Reynolds surveyed managers and their subordinates at workplaces in China and the United States. The researchers also used MTurk to hire people to do small computer-based tasks. In each of these experiments, participants answered questions about their motivation. Employees who were the most helpful and generous toward colleagues later reported the most cases of negative actions, such as taking something from the office without permission or making fun of a colleague.

“Psychological entitlement only increased for those who engaged in OCB and had high external motivation for engaging in OCB,” the researchers write.

After exhibiting good behavior at work, people exhibited a moral-licensing effect in their personal lives as well. After doing something nice and OCB-worthy at the office, employees who worked for companies that carefully monitored their time (and any negative behavior) were more likely to report harmful behavior at home, such as saying hurtful things to family and friends. “Employees’ on-the-job requirements can negatively influence their behaviors in non-work domains, thereby causing conflict with family members and peers,” the researchers write.

The danger of being inauthentic

CSR can also lead to problems if employees or customers sense a company is being inauthentic, suggests research by University of Cologne’s Lea Cassar and Columbia University’s Stephan Meier.

Many hotels cite environmental concerns for not changing towels daily, but this can turn off people who suspect the hotels’ primary motivation is to save on housekeeping costs, says Meier. A shoe brand that donates its products to underprivileged people may seem genuine to the consumer, he says; however the brand could hurt its image if consumers sense it donates products strategically, either to help its own business or to motivate its workers.

Despite the potential pitfalls, CSR has clear pay-offs, especially in terms of recruiting.

The researchers looked at 3,000 temporary workers who were asked to come up with slogans for a pharmaceutical distributor’s website.  They were asked to come up with three slogans as the baseline. Various monetary and charitable incentives were offered to entice them to provide a second set of three slogans, including a donation that would be made to Doctors Without Borders. In one group, employees received the charity-based incentive independent of their performance; a second group only received the donation-based incentive after completing the second set of slogans.

The findings suggest that employees make a distinction between a CSR effort that is dependent on employees’ extra efforts and one that is not, although both can have negative impacts on the company. The researchers find that workers were no more productive when the company was donating in a way that was uncoupled from effort. In fact, workers may have been less productive: when a donation wasn’t on the table, 61 percent of people completed a second round of slogans—compared to only 52 percent when a donation was involved.

And hinging a donation on effort further hurt productivity. When the researchers said they’d only make the donation when additional slogans were completed, 6 percent fewer employees completed the work. Meier concludes that when a company uses charitable incentives to get more effort—for example, by making donations conditional on effort—productivity declines and the incentive backfires.

Cassar and Meier also find that employees were more impressed by companies that simply donated to charity—as opposed to ones that donated to a charity after market research suggested doing so had an upside for business. “If CSR becomes a marketing tool, then it doesn’t work. People really need to believe that it’s authentic in order to have those benefits,” Meier says, adding that many companies smartly keep CSR efforts low key rather than advertise them.

Finding bright spots

Despite the potential pitfalls, CSR has clear pay-offs, especially in terms of recruiting.

A company, if it clearly conveys during the recruiting process its intent to benefit society, can see lasting benefits, research finds. University of Chicago’s Daniel Hedblom, Queen’s University’s Brent R. Hickman, and List used data to track how advertising a company’s support of a nonprofit impacted recruiting and work quality.

To do this, they performed an experiment that doubled as a business venture, which involved launching a data-collection consulting company and hiring 170 part-time workers in 12 US cities. The initial job descriptions they posted were identical, but the researchers tweaked the job details in later emails. When people inquired about positions, they received an email saying the work would consist of either data entry or data entry to benefit underprivileged children. The researchers also varied pay rates, offering some applicants $15 an hour and others $11.

When hired, employees were assigned data-entry tasks that involved looking at Google Street View. Some were asked to tally the number of broken windows or potholes in each image, which produced data that was used in some cases to help identify safe areas near schools where administrators were trying to help students avoid gang violence, and in other cases to benefit Uber. (List is a consultant for Uber.)

Helping schoolkids involved a social impact—and had a big effect on recruiting. When that social mission was mentioned in emails, the company saw 26 percent more people interested in the job, comparable to the 33 percent bump the company saw when it offered $15 an hour. Advertising jobs that had a social mission improved the pool of applicants, with no additional, and potentially expensive, recruiting tactics required. “This generation of young workers is more compelled than previous generations to do social good,” List says.

People who accepted a job originally advertised as CSR-driven were also more effective at work. Employees in the CSR group were more productive, analyzing images in a shorter amount of time than other workers. And while all employees could work any number of hours over a 10-day period, those in the CSR group worked longer hours.

Both women and men were affected by corporate responsibility, but in different ways. Women were 40 percent more productive in accurately analyzing Google Street View images as a result of CSR and worked an hour more per day. Men produced higher-quality results but did not increase the number of images that they analyzed. “Together, these insights suggest that CSR draws out higher output from women and higher quality from men,” the researchers write. “CSR should not be viewed as a necessary distraction from a profit motive, but rather as an important part of profit maximization similar to other non-pecuniary incentives.” Customers and employees, List assures, will still view CSR as authentic, even if it is recognized to boost profits.  

While the results suggest that CSR can have strong, positive effects, List recommends companies keep the findings on moral licensing in mind and monitor employee behavior. He notes that because so much behavior is driven subconsciously, simply making employees aware of the tendency to couple good actions with bad could counteract the bias.