Article: Thursday, 6 February 2025
In recent years, many companies have implemented an array of corporate social responsibility (CSR) activities: they invest in CSR, employ dedicated teams, and produce annual CSR reports. Yet, despite these efforts, the transition to a more sustainable economy is going painfully slowly. Why is progress lagging, even though so many organisations claim they want to make a positive impact on the environment and society?
A common explanation is greenwashing – companies using superficial CSR efforts to appear sustainable without making substantive changes. Certainly, greenwashing is part of the issue. However, it does not tell the entire story. Some firms genuinely aim to do good but fail to achieve meaningful environmental and societal outcomes. Researchers refer to this as means–ends decoupling: the company’s CSR initiatives (the ‘means’) do not fulfil the intended sustainability goals (the ‘ends’). In other words, the problem is not always a lack of good intentions – it may be that companies are implementing CSR the wrong way.
In a paper published this month in the Journal of Management Studies, my co-authors and I examined how organisations can overcome means–ends decoupling by studying four multinational companies. Although all four companies had implemented CSR practices, only two managed to achieve their stated CSR goals. Drawing on 81 interviews with managers and 70 secondary data sources, we identified a key difference between the successful and the less successful: an approach we call CSR experimentation.
CSR experimentation has two critical parts:
Successful companies actively gather insights from local employees and stakeholders about how their CSR initiatives work on the ground. This includes understanding region-specific challenges, cultural nuances, and community needs.
Companies then use this locally generated knowledge to adapt and refine their CSR activities, often giving local managers the autonomy to tailor initiatives to specific circumstances.
Together, the two parts create a tight feedback loop between knowledge production and practice adaptation, which increases the likelihood that CSR practices achieve the intended goals.
Our paper suggests two main ways in which companies can foster CSR experimentation:
Rather than limiting CSR decisions to top management, companies should include employees at various levels who have direct knowledge of local issues. Their on-the-ground experience is invaluable for identifying what works and what doesn’t.
When employees are constantly pressured to demonstrate that CSR activities increase short-term profits, there is little room to experiment and learn. Easing this short-term pressure allows for the trial-and-error process needed to refine CSR practices and evaluate whether they truly achieve the intended sustainability outcomes.
Implications for investors and ESG rating agencies
Our paper also has implications for sustainable investors and environmental, social, and governance (ESG) rating agencies. These organisations typically evaluate CSR based on current initiatives and reports, but they also need to assess how these practices are implemented and iterated. Specifically, they should ask:
A company’s capacity for CSR experimentation often indicates whether a company will be able to deliver the environment and social impact it purports to create.
Further reading: In addition to reading our open access paper, you can also read a practitioner summary published on HBR.org. Or you can watch the video below where Prof. Marti explains these concepts.
Join our webinar series. In this webinar, faculty members from RSM’s new online MSc Sustainability Management discuss with industry experts how young professionals can make an impact.
Join us as we speak to our first guest Mark van Baal from the shareholder advocacy group Follow This.
In the first half of the webinar, RSM professor Emilio Marti will discuss with Mark how shareholder engagement can influence companies, particularly in light of the current ESG backlash.
In the second half of the webinar, professor Emilio answers questions from participants about our exciting new 100% online Master Sustainability Management, which is accessible to students anywhere in the world. For more information, get the brochure here.
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