**2. The determinants of strategic CSR**

#### **2.1 Definition of strategic CSR**

The concept of CSR was defined as a structure of pertinent standards, programs, and strategies associated with economic, legal, ethical, and organizational aspects in compliance with communities' expectations to generate a social good [24]. It can combine more

key areas such as: ethics, governance, transparency, business relationships, financial outcomes, community collaboration, product quality, employment rights, better workplace, conservation of natural resources, and respect of environment [25].

Several motivations encourage companies to engage in socially responsible activities, five fundamental ones were mentioned by Weber [26]: CSR has a positive impact on the corporate reputation and on the level of employee commitment. It could boost the sales, increase market share, and attenuate the systematic risks [26]. Besides, according to Polonsky and Jevons , the possible reasons to adopt CSR practices involve: boosting the financial performance, contributing to market value, guaranteeing a more general positive impact on societal stakeholders, keeping good relationship with customers, and improving product quality [27].

However, this concept still ambiguous and presents different types of implementations among the companies such as strategic and responsive CSR.

In this regard, Nijhof and Jeurissen [28] claimed that combining economic dimension with social aspects is essential in order to implement the CSR pillars and especially the ethical principles in the decision-making. It encourages the managers to intervene in social standards in the business model and make this model sustainable and grounded on a real social engagement [28]. In fact, this process is likely to enhance the CSR strategization and the implementation of strategic CSR [29].

Actually, to take dynamic social decisions while generating financial outcomes, recently, Yin and Jamali [15], Vishwanathan et al. [30], Yu and Liang [16] tried to explore the determinants of the strategic CSR, seek how to create positive profitability from the resources and capacities available in the firm, and emphasize the strategic relationship between the CSR and the value creation. In this regard, Lee and Lu [5] compared the impact of the COVID-19 on the "CSR companies' stock price and non-CSR companies' stock price." Their findings demonstrate the resistance of the sustainable companies toward the pandemic, which were less affected by the pandemic and more able to recover faster from the crisis' outcomes. However, the industry category intervenes in the link between CSR and stock price and makes the COVID-19 affect the stock market differently [5].

For instance, the banking and insurance and aviation industries illustrate better financial performance in the context of non-CSR companies.

Besides, Yin and Jamali [15] studied the design of CSR implemented in China by Multinational Companies Subsidiaries. They aim to assess whether they take into consideration the strategic CSR, apply responsible practices in the host emerging countries, respond to the local stakeholders' needs, and guarantee a resident legitimacy or just acknowledge the obligations of the parent company and ignore the socially responsible activities in the host countries. By using a semistructured interview method between June 2012 and July 2014 and categorizing the data into thematically relevant categories based on NRBV, Burke et Logsdon, porter et Kramer, stakeholder theory [15].

Their findings reported that Multinational Companies Subsidiaries in China adopt the CSR engagement strategically to develop social credibility, avoid the green skepticism, and create an economic value for the companies. Nevertheless, these findings are inconsistent and inconclusive. Jamali [29], for instance, demonstrated that Multinational Companies Subsidiaries in Lebanon are neglecting the needs of local stakeholders and the CSR approaches are generally oriented to respond to home stakeholders' needs and disconnected from the local requirements. Besides, incorporating organizational structure, leadership dynamics, firm size, and contextual factors may impact the MNC subsidiaries' CSR approaches and intervene in promoting a dual outcome financially and socially [31].

Hence, strategic CSR corresponds to the highest level of commitment and implies a more global implementation of CSR within a company, whereas (2) reactive CSR is mainly governed by external constraints.

Strategic CSR is a relevant and promising research area [32]. Furthermore, the scarcity of studies concerning the channels that lead to strategic CSR [33] drive us to identify these determinants and to explore why organizations reveal different levels in terms of CSR strategies.

Integrating CSR activities into the core business operations and balancing between the needs of shareholders and other stakeholders drive to economic and social value and enhance the competitiveness; this approach is called strategic CSR. On the other hand, Hlioui and Yousfi [34] and Yousfi and Loukil [19] have shown that strategic CSR drives more pioneering socially responsible initiatives than responsive CSR and leads to more sustainable financial performance as well as more socially and environmentally responsible innovation. They define the strategic CSR as an active and dynamic strategy not just limited to the basic stakeholders' needs and reporting standards, it encourages the company to innovate socially, organizationally and to create new processes and products. They claimed that a scare number of studies have focused on differentiating between responsive and strategic CSR [19].

Thus, in order to go beyond the narrow view on CSR, generally associated with ethical practices, more studies should be conducted to review the design of sustainability among companies and to identify the channels that are likely to drive it.

#### **2.2 Relevant studies related to the strategic CSR**

To understand better the strategic CSR, we tried to gather all the relevant studies and theories related to this concept to shift from "explicitly normative and ethicsoriented studies to implicitly normative, strategic- and performance-oriented research" [35]. These theoretical frameworks can be complementary according to Yin and Jamali [15].

We start by the first theoretical model, the stakeholder theory published by Freeman [36], which emphasizes the importance of taking into consideration the stakeholders' expectations while undertaking practices that create wealth for shareholders, simultaneously. In this regard, Garriga and Melé [37] claimed that CSR is a strategic instrument permitting to involve the companies' responsibilities toward the communities into business activities to generate economic profits, acquire social compliance, and promote a greater legitimacy [37]. Moreover, Donaldson and Preston distinguished between the concept of stakeholders, the stakeholder model, stakeholder management, and stakeholder theory [38]. In the conventional approach, companies must satisfy the interests of stakeholders equally. However, recent research explores the importance of addressing the interests of powerful stakeholders before those of regular stakeholders. For instance, Yunus et al. provide evidence on the role of government, media, and creditors in the adoption of carbon management strategies in Australia [39]. On the other hand, Haddock-Fraser and Tourelle studied the positive impact of customers on the disclosure of environmental information particularly related to climate change [40].

Actually, the stakeholders who are more considered powerful are institutional investors and customers [41], because they have a strong ability to direct the orientation of companies toward the socially responsible activities and the Sustainable Development Goals (SDGs). Hence, the presence of these actors can be considered as a key factor to promote the implementation of CSR practices.

The second model is the natural resource-based view (NRBV) introduced by Hart [42] to analyze the link between the natural resources and corporate innovation, specifically how it could deal with the environmental issues and increase competitive advantages. According to Hart [42], the resource-based theory did not take into consideration the interconnection between corporation and its external environment. Hence, he identified three strategic factors to implement the NRBV: pollution prevention, product stewardship, and sustainable development. Each of these is likely to drive different environmental actions. Pollution prevention aims to eliminate the pollutants from the chain supply and decrease the hazardous waste to generate lower costs and better efficiency. Product stewardship seeks to integrate the environmental issue into the product life cycle by using convenient materials and setting environmental management principles. On the other hand, the sustainable development strategy is not limited to the environmental dimension and includes economic and social issues [42]. Despite the involvement of these external elements, Hart [42]'s NRBV model is limited and focuses only on the environmental factors. Hence, it is substantial to consider a study that implements the CSR broadly involving different stakeholders' needs.

The third model that can explain the strategic CSR is proposed by Burke and Logsdon [43], who presented five strategic dimensions as a core of the business activities: centrality (the adequacy of social activities with the firm's mission and objectives), proactivity (the ability to be visionary and "anticipate emerging economic, technological, social or political trends in the absence of crisis," voluntarism (making decisions in the absence of external requirements), visibility (practicing CSR activities in compliance with the stakeholders' needs), and specificity (the ability to derive economic benefit from CSR activities). Voluntarism, centrality, and proactivity are based on the CSR planning and positioning. The remaining dimensions are focusing on the economic benefits of the CSR commitment [43]. This model was widely discussed: for instance, Husted and Allen [44] tested the Burke et Logsdon's model [43] drawn on a sample of 110 large Spanish companies. They showed that visibility, appropriation, and voluntarism, unlike centrality and proactivity, have the most influential effects on corporate innovation [44].

The fourth theoretical framework provided by Porter and Kramer [45–47] differentiates between strategic CSR and responsive CSR. It considers citizenship practices as a key factor to generate value creation and improve the strategies and capacities [45]. They have claimed that the combination of strategic CSR and the core business competencies leads to a competitive advantage, which is called "the shared value." It is a requirement to increase the firm success [46]. Porter and Kramer [47] believe CSR strategies should be rethought considering both economic and social value. Creating shared value is therefore an opportunity to increase business income.

In fact, moving beyond tensions and trade-offs, Porter and Kramer [47] argue that shared value can be created by reviewing products and services through the value chain (e.g., cost reduction) and through cluster development [47]. By taking a strategic approach, companies can select the activities they have in the value chain, the necessary resources to devote to being socially responsible as well as choose those activities that will strengthen their competitive advantage [46]. For instance, in Nestlé, CSR programs are central to the core business of the company. In order to ensure the highest-quality ingredients for the company's chocolate, Nestlé works with all members of its global supply chain to spread best agricultural practices and technology, especially in underdeveloped countries. These practices result in sustainable development, supplier loyalty, and high-quality chocolate [46].

*Perspective Chapter: Rethinking CSR Strategies in the Era of COVID-19 DOI: http://dx.doi.org/10.5772/intechopen.106248*

The fifth theoretical framework is suggested by Vishwanathan et al. [30], who studied strategic CSR by defining pillars to integrate it into the core of business strategies and therefore contribute to financial performance. Based on the causal approach of Goertz, which defines the most relevant attributes moderating the interaction between two concepts [48]. They have determined the most relevant causal attributes controlling the relationship between strategic CSR and financial performance. Hence, four mechanisms have been defined: reputation enhancement, risk mitigation, innovation capacity, and stakeholder reciprocity, in order to qualify CSR activities as strategic and guarantee a financial performance [17].

1.Improving reputation: Zerbini indicated that reputation is considered a strategic factor that could be enhanced through the application of strategic CSR [49]. Moreover, Axjonow et al. claimed that CSR permits a good reputation, which promotes competitiveness and guarantees business legitimacy [50].

Firm reputation and brand value can also complement a differentiation strategy. If the advantages created through CSR investments resist competition, a CSR strategy may create sustainable competitive advantages that can generate sustained abnormal future profitability.


The sixth model is set up by Yu and Liang [16], who assessed the level of strategic CSR through three new dimensions that are pace, relatedness, and consistency by referring to Tang et al. [33]. The pace detects whether the CSR is involved into the business activities conveniently and rapidly [58, 59]. Based on the path dependency theory, which is "a central construct in organizational research, used to describe a mechanism that connects the past and the future in an abstract way," consistency in the implementation of CSR will help firms accumulate and absorb CSR knowledge, develop complementary resources in a regular manner. According to Vermeulen and Barkema [60], consistency in CSR engagement indicates that a firm involves itself with CSR activities in a systematic and regular manner. Finally, the relatedness of a CSR engagement strategy refers to the similarities in the resources, skills, and knowledge required by the different CSR dimensions in which a firm engages.

Hence, relatedness is used "to measure the degree of relatedness among different aspects of CSR" and whether companies can generate social performance and financial performance from additional activities [61] and to examine whether the companies are maintaining positive stakeholders' relationships they have used the aspect called consistency.

This model has highlighted the importance of the stakeholder's implicit demands, which are not explicitly claimed in any contract such as the promises of favorable work conditions, to implement a strategic CSR. Besides, they have illustrated the crucial role of customers in the strategic orientation of CSR, the conscious consumerism or customer awareness enforces the companies to adopt strategic CSR into their business practices to keep a positive relationship with the customers. Moreover, building a solid corporate reputation is a key element to maintain a strategic position and apply sustainable practices.

Hence, this study sheds light on the aspects that impact firm's corporate visibility, for instance, customer awareness and stakeholder's implicit demands and which promote the strategic CSR orientation.

According to Yu and Liang, the corporate reputation, the customer awareness, and the consideration of stakeholders' implicit have a significant impact on the level of strategic CSR [16].

Briefly, the anterior studies tried to define the key elements of strategic CSR; however, few researchers have determined the factors contributing to strategize CSR during crisis. Hence, based on the previous theoretical framework, we review the main features of strategic CSR that promote its implementation among business practices.

#### **2.3 The characteristics of strategic CSR**

Generally, the strategic CSR can be characterized as follows:

First, strategic CSR is a process reflecting the interactional link between the stakeholders' needs and the firms' objectives and practices. In fact, firms meeting stakeholders' requirements are setting objectives compliant with these requirements, which generates CSR practices and social advantages.

The relationship between corporations and stakeholders is based on the communication strategy that takes into consideration the influence of CSR on the stakeholders' well-being [62]. Lima and Greenwood have compared the benefits of two corporate communication strategies to reach CSR objectives [63]. For instance, communication strategies or "stakeholder responsiveness strategy" [64]. The most ordinary kind of CSR communication is to highlight the practices of companies for the public interest, mainly when the company causes damages so the CSR practices and its communication is considered as reactive answer to potential constraints, it can be called stakeholder information strategy [65].

On the other hand, the stakeholder engagement strategy [66] is based on the stakeholder perspective. Modern companies are setting more and more interactive relationship with stakeholders to achieve more than corporate self-interests [66]. Moreover, stakeholder involvement must be reported as a corporate sustainability standard to define the social responsibility level, which reflects the social value generated through the implementation of strategic CSR.

Besides, Lim and Greenwood [63] found that each kind of CSR communication strategies is contributing to reach financial objectives and social goals; however, the CSR communication grounded on stakeholder involvement has more pronounced effects on the fulfillment of CSR objectives [63].

#### *Perspective Chapter: Rethinking CSR Strategies in the Era of COVID-19 DOI: http://dx.doi.org/10.5772/intechopen.106248*

Similarly, Park and Ghauri have explored powerful stakeholders' groups significantly impacting CSR initiatives in small and medium enterprises, in emerging countries [67]. They found that consumers are the most powerful actors as they are likely to drive companies to undertake more responsible activities. The managers and the local communities play an important role, too. These stakeholders can be considered as the most dominant and noteworthy actors influencing the engagement of companies in CSR initiatives. One explanation that has been tested by Du et al. is that consumers can change their products to find a green product associated to socially responsible company [68]. This is consistent with the fundamental influence of consumers' attitude toward the lack of CSR activities and its important effect on the corporate profitability and growth. On the other hand, many businesses can use CSR activities as a way to influence customers' behavior. Accordingly, the responsible engagement could influence the customers' behavior [69].

In fact, by using a specific CSR communication strategy to attract the consummation of green products, customers contribute actively to the growth and profitability of the firm. Simultaneously, these actors associate the products with the company ethics and practices of the company, which forces firms to adopt more strategic CSR practices [69].

Another important actor impacting CSR initiatives is the presence of institutional investors. It is highly argued that institutional investors have the ability to direct the orientation of companies toward the socially responsible activities and to respect the Sustainable Development Goals (SDGs).

After, the introduction of environmental and social legislation, socially responsible investment is no more a choice for investors, but it is mandatory in the United States, for instance. This kind of investment contributes to a low long-term risk on the investment and better corporate reputation, which guarantee the long-term prosperity of the firm. Similarly, in the United Kingdom, the institutional investors involve the socially responsible investments into their assets to respond to the legal and social constraints [70]. Hence, the presence of institutional investment could impact positively the implementation of sustainable practices.

Second, adopting strategic CSR should generate social and financial outcomes. Actually, to pursue a strategic orientation, the mechanisms of strategic CSR must be integrated into the core business activities in order to boost the internal value chain activities of companies and accelerate its external competitiveness [17].

Hence, the shift from an announced strategy to an operational strategy (strategy as practice and interactive model) is an important key element of the strategic CSR. In this case, CSR can be adopted to help companies realize their strategic, economic, and social objectives, this process is called strategization [71].

Moreover, Maury [20] found that combining the strategic CSR with the convenient business strategies, notably, growth and prospector strategies can contribute to enhance financial performance and competitive advantage. They have claimed that socially responsible investment (SRI) is linked to an economic profit under the condition that CSR initiatives are involved in the right business strategies [20].

Recently, Kong et al. [72], Maury [20] confirm that companies implementing prospector strategy are more engaged in the sustainability practices since, it makes the firm acquire more intangible resources than other business strategies [72]. In fact, the prospector companies seek to launch new products and explore new markets in the context of decentralized structure. They promote flexible technological and management innovations. Accordingly, the CSR itself can be considered as a feature of this innovation. Besides, strategic CSR promotes considerably this aspect. On the other hand, defensive CSR strategy focuses on economies of scales with limited efforts to explore new markets in a centralized structure that does not contribute to the promotion of CSR initiatives.

However, acting irresponsibly and neglecting CSR standards is a serious problem for the companies because it can reduce the financial outcomes and impact the corporate performance negatively. Thus, as claimed by Garriga and Mele , CSR can be considered a fundamental aspect to reach economic objectives and guarantee the survival and growth of firms [73]. Besides, associating business activities to CSR practices may change firms' values [74]. In fact, behaving in a socially responsible way contributes to decreasing the operating expenses and enhances, therefore, the financial performance [75]. Ensuring sustainable corporate growth can be achieved by responding to the stakeholders' needs and implementing CSR actions [76]. The adoption of CSR is a signal of the presence of firms' value and the consideration of stakeholders' expectations.

Third, engaging in CSR practices strategically aims to enhance image quality to gain legitimacy the stakeholders' eyes. Consumers concerned about CSR could buy more products from socially responsible companies, which improves their financial performance [77, 78]. Besides, CSR practices increase employees' involvement and loyalty, which improves employees' work conditions. This virtuous circle enhances the financial performance progressively [79].

In this context, several studies have highlighted the crucial role of corporate reputation to make CSR practices enhancing the financial performance. For instance, in the context of Twain companies, Lai et al. emphasized the mediation role of reputation between CSR and brand performance [80]. As well as for Australian firms, Galbreath and Shum found that reputation is enhancing the benefits generated from CSR initiatives [81]. Similarly, Saeidi et al. confirmed that CSR initiatives could boost the financial outcomes through specific channels such as the reputation and customer satisfaction [82]. Hence, the reputation can be strongly associated with the company's level performance [83].

Lately, Singh and Misra argued that corporate reputation can be explained with the social identity theory [84], as Turban and Greening claimed: CSR initiatives enhance the corporate reputation, which makes stakeholders identify themselves with the company and make the employees more attracted [85]. In fact, firm reputation is described as a set of conceptual features collected from its past actions and drive stakeholders to draw a forecast on its future profitability and differentiate the company from their rivals [86]. It is recognized as an important intangible asset that can be maintained or destroyed CSR benefits [87]. This asset makes the company attracting more customers and investors, which reflects the capacity of the firm to consider the stakeholders' interests. Furthermore, similarly to the impact of the quality product on the corporate reputation, the CSR engagement has a valuable impact on the notoriety of the business activity among the resident community [88]. Hence, several prior studies have revealed the positive effect of the CSR on the corporate reputation by highlighting its link to the customers' behaviors [80] or by illustrating its influence on the employee commitment.

Accordingly, Nguyen et al. [89] stated that as a result of the CSR engagement, corporate reputation can progressively increase and improve, therefore, the business revenue, build a competitive advantage, and generate an enhanced corporate performance. They studied the impact of CSR on corporate reputation and the mediating role of the latter concept on the relationship between ethical leadership and firm performance. They found a positive connection between the four concepts. They identified a positive impact of CSR on the corporate reputation. In fact, the orientation toward strategic CSR can improve the corporate reputation among the employees and the local community, which could increase the business revenues [89].

#### *Perspective Chapter: Rethinking CSR Strategies in the Era of COVID-19 DOI: http://dx.doi.org/10.5772/intechopen.106248*

Hence, the connection between CSR and corporate performance is pertinent in order to avoid negative social and economic externalities that can occur if the company does not respect the legal and regulatory requirements [90].

Besides, a positive link between corporate reputation and firm performance was identified. Moreover, the firms implementing CSR approaches into their business strategies make the firm gain a good reputation and thus, generate performance financially and socially notably by retaining customers and building a competitive advantage [91].

Singh and Misra [84] have studied the moderating effect of corporate reputation on the association between CSR and organizational performance, they have found a positive impact of CSR on organizational performance, and this relationship is moderated by the corporate reputation. In fact, the firms with a better reputation are more pressed to adopt CSR strategy. In fact, stakeholders' perception of corporate reputation and the efforts undertaken by the business, especially among the local community and customers, defines reputation-CSR-organizational performance association. They conclude that managers have to consider the customers, employees, and community requirements, when defining CSR strategies and the organization objectives. In fact, CSR could be a perfect instrument to direct the company toward the organizational performance in the context of European multinational firms located in India and corporate reputation moderates the link between CSR toward customers, employees, and community, which strength this association [84]. Hence, the CSR engagement builds a better image based on authentic principles oriented toward stakeholders.

Companies must come across all these interconnected aspects when designing their CSR strategy to be able to achieve a better financial performance. Briefly, three basic characteristics have been recurrent in the above discussion: the involvement of stakeholders' expectations into the core of business activities, the enhancement of corporate reputation and financial performance. We notice, however, that they have been examined separately. It would be interesting to construct a general proxy for strategic CSR based on theoretical frameworks mentioned in order to promote the strategization of CSR.

### **2.4 Strategization of CSR**

The CSR strategy must be well studied theoretically to overcome the philanthropic and simplistic views of CSR. It is a differentiation that can be a business objective or a strategic planning implemented into the corporate strategy [89].

To strategically incorporate CSR activities into the core practices of businesses, we rely the Jarazabkowski's model [92]. It defines the strategization as a process by which a strategy is integrated into the organizational behavior and the culture of the company. In fact, Jarazabkowski [92] set strict circumstances to qualify an activity as strategic, such as these activities must be goal-oriented, firstly.

Besides, Jarzabkowski's model of strategization revolves around the triangular interplay and reciprocal influence between management and the organizational community and strategy, the following features are all verified for the case of CSR practices because, strategic CSR aims to generate social and economic value by intervening all the stakeholders' expectations into the CSR initiatives in a studied way, which prove its capacity to be strategized [93].

Also, the theoretical framework of Vishwanathan et al. [17] is more integrative and includes common aspects with the other previous models such as the reputation. Hence, the factors that can determine the strategic orientation of CSR are customers' awareness, the presence of powerful stakeholders, the enhancement reputation, the empowerment of innovation, and the risk mitigation [17]. However, to the best of our knowledge, they have set up the theoretical framework of what should be a sustainable CSR strategy without being tested empirically, yet.

Hereafter, we define the greenwashing, determine its types and the main factors that can reduce this problem.
