Who Pays for Corporate Social Responsibility?: Proposal for an Externalization Index of CSR Costs

Abstract

Although corporate social responsibility (CSR) aims to improve the positive impacts of companies on society and the environment, most studies focus on the benefits that these practices generate for companies and not on the benefits they generate for the society, which is why this chapter aims to establish if companies assume the costs associated with social responsibility or if, on the contrary, they transfer these to third parties or society as a whole. Based on the above, the theory of social costs was taken as a reference to develop an index that allows determining the relationship between CSR practices and six levels of transfer or externalization of associated CSR costs. The empirical contrast of the index was carried out in a sample of 7233 Colombian companies, due not only to the convenience and timeliness of the information but also to the country’s performance in terms of corporate social responsibility. The findings show that firms have a moderate degree of externalization of their CSR costs and pass these on to different stakeholders, especially the state in general and third parties in particular such as employees, consumers, and suppliers. These results then show the need for the concept and practice of CSR to include more specific guidelines and parameters, among which stands out the proposal to recognize as corporate social responsibility actions only those recorded as a reserve in the accounting books of companies allowing with this measure that CSR actions are assumed directly by the organization that obtains the benefits. By doing this, the associated costs transfer to third parties or society is avoided, making CSR a more responsible practice.