Notes

1
Corporate social responsibility is the sustaining commitment by businesses to devote themselves to economic development and improve the quality of the workforce’s life, and the like. As to the companies, it is of great significance for them to attach importance to business ethics, corporate social responsibility, and so on. There is a protracted debate about the legitimacy and value of corporate responses to CSR concerns. As CSR comes into contact with many of the issues traditionally addressed by the government, like human rights and community investing, it is strong criticism that freely elected governments best solve societal problems. The resources of a corporation are poorly suited for addressing those social problems, and therefore, it is argued, that they should not be misallocated.
2
Socially responsible companies also have less risk of negative rare events.
Overlooking negative social and environmental externalities when valuing a company
might be equal to ignoring significant tail risk. The risks related to CSR could be grouped
into three categories: corporate governance, environmental aspects, and social aspects.
Companies that adopt the CSR principles are more transparent and have less risk of
bribery and corruption. In addition, they may implement stricter and, thus, more costly
quality and environmental controls, but they run less risk of having to recall defective
product lines and pay heavy fines for excessive pollution.
3
There are also other cases in which doing what is good and responsible converges
with doing the best for the particular business. Some CSR initiatives can dramatically
reduce operating costs. For example, reducing packaging material or planning the
optimum route for delivery trucks not only reduces the environmental impact of a
company’s operation but also reduces the cost. The process of adopting the CSR
principles motivates executives to reconsider their business practices and to seek more
efficient ways of operating.