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Business Horizons (2010) 53, 445—453

www.elsevier.com/locate/bushor

EXECUTIVE DIGEST

The benefits and costs of corporate social
responsibility
Geoffrey B. Sprinkle *, Laureen A. Maines
Kelley School of Business, Indiana University, 1309 East 10th Street, Bloomington, IN 47405-1701, U.S.A.

1. Perspectives on corporate social
responsibility
Business leaders have expressed far-ranging and
deeply-held opinions about corporate social responsibility (CSR). Nobel Prize-winning economist Milton Friedman (1970) succinctly expressed one viewpoint
on CSR in his article The Social Responsibility of
Business is to Increase Its Profits. John Mackey, the
founder of Whole Foods, advanced a different viewpoint when he stated: ‘‘The business model that Whole Foods has embraced could represent a new
form of capitalism, one that more consciously works
for the common good instead of depending solely on
the ‘invisible hand’ to generate positive results for
society’’ (‘‘Rethinking,’’ 2005).
Regardless of business leaders’ fundamental beliefs about CSR, they cannot ignore the implications of CSR for their businesses. Accordingly, our goal in
this article is to provide some guidance for organizations that wish to assess the benefits and costs of CSR. Knowledge of these benefits and costs can inform
managers’ decisions on their companies’ positions on
CSR and provide input on CSR endeavors. Because
accounting plays a vital measurement role in organizations, we focus on the interplay between accounting and corporate social responsibility.

* Corresponding author.
E-mail addresses: sprinkle@indiana.edu (G.B. Sprinkle),
lmaines@indiana.edu (L.A. Maines).

We first provide an overarching definition of
corporate social responsibility and categorize the
various types of socially responsible endeavors in
order to identify activities associated with CSR that
create costs. Following this, we articulate firms’
likely motivations for engaging in CSR in order to
identify potential benefits. We then discuss the role
of accounting and corresponding linkages between
accounting and CSR; here, we pay particular attention to how firms might measure the costs and benefits of CSR decisions. Finally, we provide some
concluding thoughts. Throughout the article, we
offer numerous real-world examples to illustrate
our ideas.

2. What is CSR?
The expansive literature on CSR contains numerous
definitions of the construct. For example, the European Commission (2010) defines corporate social responsibility as ‘‘a concept whereby companies
integrate social and environmental concerns in their
business operations and in their interaction with
their stakeholders on a voluntary basis.’’ A common
definition in the management literature comes from
Davis (1973, p. 312), who defines CSR as ‘‘the firm’s considerations of, and response to, issues beyond the
narrow economic, technical, and legal requirements
of the firm to accomplish social [and environmental]
benefits along with the traditional economic gains
which the firm seeks.’’ Perhaps the most parsimonious definition that encompasses the above ideas is

0007-6813/$ — see front matter # 2010 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2010.05.006

446
that CSR represents voluntary firm endeavors which
benefit society.
In addition to numerous definitions of CSR, there
are many terms for the same–—or similar–—construct.
The most common term used in addition to corporate
social responsibility is ‘‘corporate sustainability.’’ Corporate sustainability focuses on long-run shareholder value by incorporating principles in nine areas: ethics, governance, transparency, business relationships, financial return, community involvement, product value, employment practices, and environmental protection (Epstein, 2008). Thus, the activities associated with corporate sustainability are very similar to those discussed in this article, although

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