Corporate social responsibility and its link to financial performance

Abstract

Abstract Purpose – This paper applies the social contract and legalistic ethical frameworks, to study whether or not corporate social responsibility (CSR) and sustainability support corporate financial performance. The purpose of this paper is to provide empirical data from Johnson & Johnson, a pharmaceutical firm, to document whether or not CSR has contributed to creating financial wealth and value for the corporation. Design/methodology/approach – The paper approaches CSR as embedded in social contract and legalistic ethical frameworks, which suggest that business organizations are self‐motivated to report on CSR. The underlying premise of the research is that socially desirable sustainable activities are expected to improve financial performance. Findings – A case study of a multinational corporation (MNC) and CSR member company, Johnson & Johnson, substantiates that CSR and sustainability have contributed to improve the organization's economic performance. The empirical evidence from Johnson & Johnson suggest that profitability can be sustained for a long period of time if economic performance is effectively integrated with social and environmental goals, as part of the business strategic planning process, to benefit shareholders, consumers, society and the community at large. When CSR is incorporated in business strategies of sustainability, including social and environmental performance, it complements economic profitability objectives. Originality/value – The contribution of this paper is in the extension and application of the importance of sustainability and CSR in the pharmaceutical industry. It is one of the few studies that examined the impact CSR and sustainability have on the financial and economic performance of the health care industry. The study has documented that sustainability promotes transparency, adherence, and disclosure that incorporates and promotes social equity, environmental restoration/renewal and financial performance. It is argued that in the long run, organizations that have integrated sustainability and CSR in their strategic planning processes are able to manage risks and take advantage of opportunities of programs that are safer, greener, and economical.

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