article · Corporate Social Responsibility and Environmental Management
An examination of seventy-nine industries in South Africa between 2017 and 2024 shows that corporate social responsibility correlates positively with profit on assets. Focusing on industry-level data accounts for spillover effects that extend past single businesses while removing firm-specific noise. The positive association between social responsibility and financial returns remains linear when adjusting for advertising costs, government subsidies, and interest spending. Furthermore, calculations of long-run effects indicate that this beneficial relationship strengthens over time. Quantile analysis reveals that the positive link between social responsibility spending and financial performance is especially pronounced within high-profit industries. These findings align with stakeholder theory and indicate that socially responsible business practices support, rather than hinder, commercial profitability across emerging markets, maintaining robustness across alternative estimation techniques and datasets containing zero reported expenditure.
Businesses frequently debate whether investments in social responsibility compromise their financial performance. This research provides evidence from an emerging market that ethical and social practices do not detract from earnings. Instead, such initiatives align with long-term commercial success, demonstrating to executives, investors, and policymakers that industry-wide commitments to social responsibility can actively reinforce profitability, particularly among high-performing sectors.
The abstract focuses on econometric analysis of industry data and does not present a commercial product, direct application pathway, or technology readiness level. However, corporate strategists, industry associations, and investment analysts could use these macro-level insights to justify capital allocation toward sustainability programmes, recognising that financial gains materialise primarily in the long run and within highly profitable sectors.
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ABSTRACT This study examines the relationship between corporate social responsibility and profit on assets in South Africa using a panel dataset comprising 79 industries observed annually between 2017 and 2024. The study uses an industry‐level dataset which, unlike firm‐level inquiries, purges firm‐level noise and acknowledges the empirical regularity that corporate social responsibility often generates spillover effects that extend beyond individual firms. In line with the stakeholder theory, results from the system generalized method of moments show that corporate social responsibility correlates positively with profits and that the relationship is linear controlling for advertising expenditure, government subsidies, and interest expenditure. The long‐run multiplier derived using the delta method suggests that the relationship is much stronger in the long run. Quantile regressions additionally show that the relationship is particularly significant in high profit industries. These results contribute to the ongoing debate on the financial consequences of corporate social responsibility in emerging markets and suggest that socially responsible practices may be consistent with, rather than detrimental to, profitability. The results are robust to the inclusion and exclusion of industries with zero corporate social responsibility expenditure in some years as well as the use of an alternative identification strategy, namely the Lewbel instrumental variable approach.
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DOI: 10.1002/csr.70925
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