To Each Their Own: Corporate Social Responsibility efforts need to be tailored to each nation

Businesses invest in implementing Corporate Social Responsibility (CSR) programs to impact society and the environment. In response, customers evaluate companies’ CSR efforts to decide whether they meet social expectations, leading to well-informed purchasing decisions. The outcome either improves or halts a business’ growth. Thus, understanding customer reactions to CSR activities and the drivers behind them can help boost the growth of companies. Transparency plays a key role in driving CSR effectiveness, and its impact varies across countries. As such, CSR efforts are most impactful when customized for the host country’s culture towards transparency. 

Martin Heinberg, Yeyi Liu, and Xuan Huang of Leeds University Business School, together with Andreas Eisingerich of Imperial College Business School, have found that national factors affect corporate transparency and the outcome of CSR efforts. They surveyed local businesses in China, Japan, and the United States, the world’s three largest economies. ​A few foreign companies in these countries were also added. Respondents answered online questions about a product line and then the CSR efforts of the business associated with it. Consumers’ responses to the survey varied by nationality. In each country, respondents favored corporate transparency to varying degrees. 

Interestingly, this study confirms the authors’ view that CSR efforts should vary by country based on their culture towards corporate transparency. According to the survey, businesses in the United States display the strongest relationship between CSR and customer loyalty, and those in China, the weakest relationship. Using its capital market transparency index, PricewaterhouseCooper, a professional services organization, measures China to be the least transparent, and the United States, the most transparent. Standard & Poor’s (S&P Global) corporate systems evaluation tool finds a similar result. These indicators confirm the premise put forth by the authors. 

National laws and culture shape how businesses embrace transparency, according to the study findings. For example, consumers of countries with strict transparency regulations tend to be more demanding when it comes to CSR. For example, the United States demonstrated a strong relationship between CSR and customer loyalty in the survey because its Corporate Transparency Act of 2019 mandates business ownership disclosure. Likewise, civil societies, such as a country’s media, seek greater transparency.  

This study demonstrates that even in a global economy, how countries treat transparency can affect business stakeholders such as local employees, investors, and customers. For this reason, CSR initiatives and policies must be tailored to each country. Governments can influence business transparency directly through regulations, or indirectly by shaping stakeholder behavior. Nonetheless, businesses must identify what CSR means to their customers to fulfill social responsibilities and build customer connections successfully.