**2.2 Benefits and limitations of pursuing a CSR-based policy**

There are many reasons for pursuing a CSR-based policy. Kurucz et al. [28] define four reasons:


• Value creation—Value creation through CSR practices enables companies, on the one hand, to meet the demands of all shareholders and, on the other hand, to pursue operations inherent to its core business. By enabling the involvement of all related parties and meeting their demands, the company can achieve a greater financial performance with the support of all through new opportunities and solutions [35].

However, the adoption of strategies that meet the concept of CSR may involve certain costs for companies, such as the implementation of quality control equipment, the purchase of environmentally friendly equipment. Hence, it is necessary to analyze the benefits and the risks and costs of applying CSR in the business world.

#### **2.3 Relationship between CSR and financial performance**

For any company, when costs or investments of any kind are incurred, the financial return is always analyzed, that is, an investment is considered good when it generates future benefits. Thus, in order to fully understand whether the application of the CSR concept has a positive impact on the company, a link must be established with the future benefits it may bring (or not) to the company's financial performance. Thus, the relationship between CSR and corporate financial performance is a relevant topic in business management literature.

There is evidence of a positive relationship between CSR and financial performance [12, 14–16]. A good financial performance results in good social performance as companies that are more profitable have more resources to invest in social activities. On the other way, greater investment in social activities attracts more and better resources, conscious consumers, and a higher reputation, further generating greater competitive advantage over other companies.

Today, companies view reputation as an extremely important factor that must be maintained and protected [3]. A greater focus on CSR makes the company more appealing to investments and consequently leads to a higher financial performance [36], given that the current investors are aware of the importance of social, environmental, and economic concerns. Some authors also argue that there are larger investments in companies with better social performance [37]. Similarly, Eccles et al. [38] come to the conclusion that it really matters to invest in CSR. Companies that do so have a higher financial performance, creating greater value for all their shareholders, given that they gain loyal consumers and more committed workers. On the other way around, Singha et al. [30] highlight that committed workers and top management, along with sustainable environmental management practices, enhance the firm's environmental performance and that, in turn, will positively influence its competitive advantage.

However, others authors, based on the shareholder theory*,* claim that the relationship between CSR and finance performance is negative because the company's motto is the creation of profit for the shareholder and that is not consistent with the increased costs of social responsibility activities [39, 40]. Also, the incremental costs from social responsibility activities may lead to losses in the company's competitive capacity [41]. Following this point of view, CSR activities have a negative impact on the financial performance and therefore reduce the shareholder benefits.

Considering the trend in literature according to which companies pursuing policies based on corporate social responsibility have a higher level of financial performance compared to those that do not, we formulated our hypothesis as follows:

**Hypothesis:** Companies that pursue CSR-based policies have a higher financial performance compared to those that do not.
