**3.1 Strategic versus responsive CSR**

Many studies have tried to establish criterion to distinguish between the two CSR strategies. During the last years, the concept of strategic CSR has been widely discussed and extended while responsive CSR is still marginalized and often associated with low social performances. In fact, the current literature on CSR has adopted a biased and dichotomous view of CSR strategies: firms could adopt either a strategic CSR or a responsive CSR. However, firms could display a strategic CSR in some areas and a responsive CSR in other areas.

Indeed, social performance is a multidimensional concept that touches many areas in the business. Despite that fact that CSR rating, such as MSCI-KLD social index2 and VigeoEiris3 scores are based on different methodologies to calculate the global social score, they examine specific areas in the business such as the governance quality, the degree of involvement in ethical activities, the interaction with local communities, the actions put on place to treat environmental issues, and the quality of the work environment (see **Table 1**, for a detailed example).

The strategic side of CSR seems to be a promising and relevant field for further research [157]. However, the lack of consideration of the strategic aspects of CSR, and the scarcity of theoretical and empirical research on the determinants of strategic CSR [157] led several scholars to call for identifying the determinants of strategic CSR [158, 159]. While CSR tends to assume an increasingly strategic integration, very few studies analyze why organizations report different levels of strategic CSR. Thus, there is a need to deepen knowledge on the drivers and rationale of CSR behavior, and the conditions favoring strategic CSR integration.

Regarding the definition of strategic CSR, CSR becomes strategic in a company when social and environmental issues become a high priority, and diverse means and practices are mobilized to handle them [160]. Accordingly, CSR is strategic "when it yields substantial business-related benefits to the firm, in particular by supporting core business activities and thus contributing to the firm's effectiveness in accomplishing its mission". Then, the concept was developed to cover actions put into practice to achieve sustainable competitive advantages. Strategic CSR is, therefore, a set of activities that are simultaneously good for the company and the society, thus improving company's performance and creating social and economic performances [161–163]. Recently, studies have become more specific regarding the definition of strategic CSR. Strategic CSR is defined as a continuous process that takes into account its effect, helps the company to pursue its business goals while considering the stakeholders' engagement [164]. It related CSR to the corporate core business, auditing, setting of social targets, reporting, and implementation of social management systems [165]. CSR is strategic when it increasingly goes beyond the basic needs of a company's stakeholders [166]. They also argue that the assumption of a strategic perspective implies not only the definition of the business' future direction and objectives but also an understanding of the amount and apportionment of available resources. Sufficient resources allow the firm to develop strategies suitable for pursuing opportunities coherent with its current and prospective environment and capacities. Thus, resources have to be strategically invested and allocated in order to enhance CSR performance.

Since the nineties, many studies tried to provide relevant theoretical frameworks to identify the differences between CSR strategies, particularly between responsive and strategic strategies [160, 167].

<sup>2</sup> https://www.msci.com/msci-kld-400-social-index

<sup>3</sup> http://vigeo-eiris.com


**Table 1.** *A brief summary of VigeoEiris CSR scores.* *CSR: What Does Board Diversity Bring to the Table? DOI: http://dx.doi.org/10.5772/intechopen.94342*

First, Hart [167], inspired by the resource based view theory, identified three interconnected strategies based on the product stewardship, pollution prevention and sustainable development; where the latter aspect is a necessary requirement to integrate stakeholders and ensure a good CSR planning. According to Hart, to be competitive firms have to achieve sustainability and introduce more technological innovation.

Then, Burke and Logsdon [160] have founded the second framework for strategic CSR. They have been able to introduce specific dimensions to assess strategic strategies:


When CSR initiatives meet these features, they are more likely to generate economic benefits and to foster the firm financial performance.

Porter and Kramer [168–170] have introduced the third framework for strategic CSR that have significantly influenced the following CSR frameworks. They have established that strategic CSR goes beyond best practices and provides a competitive advantage, while responsive CSR concerns acting as a good corporate citizen by simply responding to stakeholders' demands. In other words, when a company combines effectively all its attributes, resources and expertise with the competitive context, its CSR strategy can be considered as a pillar of its profitability and its competitive positioning. Thus, there is a convergence between financial and social performances. Accordingly, firms must be more selective in terms of CSR projects as strategic and responsive CSR produce varied benefits [171–174].

The final CSR framework established the widely known stakeholder theory [175]. It argues that CSR projects implicate different stakeholders groups and have to lead to the wealth creation [176, 177]. Profitable CSR strategies have to align the interests of these groups [178]. Lately, inspired by Burke and Logsdon [160, 179] have identified more specific dimensions of how to ensure the convergence of social and financial performances: (1) reputation enhancement, (2) stakeholder reciprocation, (3) risk mitigation, and (4) innovation capacity.

#### *3.1.1 Reputation enhancement*

The rise of CSR has coincided with an increasing concern for the firm market image [180]. Several studies show that CSR activities could be considered as a management tool to enhance reputation [181–184]. In line with the legitimacy theory and the signal theory, strategic CSR is supposed to improve the financial performance through improving the business reputation [184]. In fact CSR activities

#### *Corporate Social Responsibility*

should visible and provide information to the existing and potential stakeholders, particularly in the presence of asymmetric information problems [185].

Reputation could be enhanced through the firm customers and employees. On the one hand, customers prefer to buy the goods and services produced by firms displaying large CSR scores [186], even when they have to pay higher prices [187]. On the other hand, employees looking for job opportunities are attracted by firms involved in socially responsible activities: they have the feeling to contribute the "legitimate" activities [188, 189].

Customers and employees behaviors have a positive influence on financial performance. In fact, investments analysts provide evidence that public announcement of CSR initiatives provides a positive signal to investors and increases therefore stock prices [190–192].

## *3.1.2 Stakeholders reciprocation*

According to the Stakeholder theory [147], taking into account the stakeholders' needs brings positive effects to the business that are not visible to all stakeholders and investors. The reputation effect is, therefore, not systematic [156]. Freeman [147] argues that there are different stakeholders groups: focusing on key stakeholders is able to drive cooperative, productive and sustainable interaction [193, 194]. For instance, setting up a fair compensation policy and a safer work environment provides strong incentives to motivated and productive employees to better work for the business [195, 196]. Furthermore, undertaking socially responsible activities favors higher levels of community endorsement, more favorable regulatory and enforcement conditions for the firm [197], and higher levels of public procurement [198, 199]. Also, it could help the business to gain legitimacy in communities' eyes and a societal license to operate [200, 201]. For instance, Dorobantu and Odziemkowska [202] point out that in mining industries, firms are prone to sign agreements that benefit local communities and compensate them for social and environmental risks they could bear.

In the absence of stakeholder reciprocity, social and environmental cost could deter the business profitability through specific channels such as the depreciation of intangible assets and increasing investors' skepticism [200, 202].

#### *3.1.3 Risk mitigation*

If in market finance, it is obvious that a good assets' diversification drastically decreases corporate risks, in CSR, interacting with more diverse stakeholders' groups can reduce company-specific risks [203]. This means that businesses have also, to care about the expectations of non-key stakeholders, even when they are not tied to their core business. It is highly argued that CSR activities decrease stock price crash risk and firm default risk [180, 204–207]. In fact they are based on controlling and avoiding risk-taking mechanisms [125, 208] and designed to avoid harming stakeholders through pollution prevention practices and fair-trade policies [179, 209].

#### *3.1.4 Innovation capacity*

Despite the fact that CSR-innovation association is not yet fully explored, some recent papers argue that strategic CSR could provide a variety of opportunities to innovate [210, 211]. According to Vishwanathan et al. [179, 209], CSR activities increase the innovation capacity because of the development of existing innovation capabilities and the creation of new capabilities, necessary to the implementation of

#### *CSR: What Does Board Diversity Bring to the Table? DOI: http://dx.doi.org/10.5772/intechopen.94342*

CSR activities. For instance, developing closer relationship with diverse stakeholders could drive valuable opportunities to respond to their needs [212–214], and to introduce, therefore, a sort of responsible innovations [215, 216]. These innovations could be driven by the interaction with key stakeholders. In socially responsible activities, employees' turnover is decreased. Consequently, employees can "imagine their future" in the firm and have incentives to get involved in the long term business activities.

They are likely to share information on the current issues and the ways to overcome them with the firm, specifically with top managers [212] and could introduce organizational innovations. Employees' involvement reduces short-term thinking and behavior, most often impeding innovation.

### **3.2 Why should firms establish CSR committees?**

Despite the large number of studies on boardroom's composition, many areas are not yet fully explored, specifically how the structure of board committees could shape strategic decisions in terms of innovation, and CSR. The governance literature concludes that committees are key determinants of the board functioning [217–219]. In fact, the composition and functions of committees have a strong influence on board's composition as well as committee's activities.

The literature on board committees focuses, especially, on monitoring committees, such as governance and audit committees. It analyzes how they could influence the quality of financial disclosure, internet reporting, earnings management, and financial performance [220–225]. Most of these papers have explored the effect of appointing independent members in committees [224, 226–229].

However, in order to deal with the wide range of board's functions and for a better understanding of stakeholder expectations, many companies have established CSR committees [230]. In France, 37% of firms listed on the SBF120 index4 have created advising committee dedicated to CSR. The creation of CSRCs is meant to respond to stakeholder theory statements: it implies the creation of governance bodies that are able to fulfill stakeholders' needs [231]. CSRCs have a strategic role to play in achieving corporate legitimacy and strategy formulation, and in implementing firms' CSR initiatives [22, 23, 232–234].

Previous studies have discussed how CSRCs could improve the governance quality [61, 235] and ESG disclosure [69]. Also, they help to solve agency conflicts through the alignment of diverse interests (managers, shareholders and stakeholders).

Regarding social performance, empirical studies conclude that they are positively associated with environmental performance [26, 236] as well as CSR performance [33, 236–238].

Besides, they are created to evaluate environmental risks, strategic opportunities, and policies. They have to define conducts, and commitments to stakeholders' needs, and are also involved in the process of environmental reporting [179, 239]. On the same vein, [240–244] argue that the establishment of a CSRC enhances voluntary and social disclosure. CSRCs are considered as a sustainable reporting assurance. Furthermore, as they are supposed to promote and monitor CSR activities, their creation could serve as a positive signal to the market and other competitors [238, 245].

Finally, CSRCs actions could reduce the risk of litigation and other reputational risks [23, 127, 244].

<sup>4</sup> The SBF120 index consists of the largest 120 capitalizations listed on the French stock Exchange market (SBF: Société des Bourses Françaises).

#### **3.3 Diversity in CSRC does matter**

The literature on heterogeneity in CSRC is not yet fully explored. Very few areas of diversity have been explored, such as the presence of independent members, gender diversity, age, and members' affiliations.

For instance, independent members in CSRCs are prone to ensure an effective monitoring and a better management: they reduce the risk of opportunistic behaviors [246, 247]. Moreover, independent CSRC could significantly increase CSR performance [246]. In fact, they can provide more objective feedback regarding firm's operations and performance. Also, they could be more sensitive to stakeholder's demands [237]. Besides, the presence of independent directors could contribute to the enhancement of governance features which improves significantly CSR performance [2].

Also, specific members could play a meaningful role in CSRC. First, the CEO membership in CSRC can negatively influence corporate governance by impairing the functions of inside directors. CSRC members who develop friendships with CEOs have low integrity and low monitoring abilities [248–250]. Powerful CEOs are likely to influence the board decision to serve their personal rather than investors' interests. CEO membership could prevent companies from generating valuable intangible strategic assets in order to achieve competitive advantages and a high level of social performance [167, 251]. Second, chairpersons could be CSRC members. They are, therefore, able to discuss CSR topics in board meetings [252].

Regarding gender diversity in CSRC, previous studies show that female directors are more inclined to respond to stakeholders' expectations and could bring important resources to committees such as information, human capital, external networks, skills and constituencies that increase understanding of the creativity and innovation [9, 58, 253]. For instance, [2] argue that female directors are more likely to be sensitive to environmental issues, bring to the light critical elements of corporate governance and care more about human rights. Accordingly, female directors could encourage and require firms to adopt and adapt their strategic CSR mindsets.

Finally, regarding CSRC functioning, [254] show that the number of meetings organized could be considered as a proxy for directors' monitoring effort. The director is likely to be more informed about existing and appropriate strategies and actions to solve problems as the number of meetings increases [254–256]. Therefore, committees suffer less from asymmetric information [41, 254].

#### **4. Conclusion**

The current chapter analyzes the literature on the influence of diversity in boardrooms and CSR committees.

Board diversity could shape the decision-making process, specifically in terms of socially responsible activities [171]. The heterogeneity of directors' profiles can increase exchanges and business' connections, offer new perspectives, and influence the board's functioning. Consequently, it can influence both financial and social performances [257, 258]. More diverse boards could drive better social performance than less diverse ones [2, 6]. It could also promote specific CSR strategies. In fact, CSR literature identifies a dichotomous approach to define CSR strategies:

1.Strategic CSR is based on original and pioneering actions to foster interactions between the firm and stakeholders, going beyond CSR regulations and standards. It needs the mobilization of specific resources and capabilities driving superior social performance.

*CSR: What Does Board Diversity Bring to the Table? DOI: http://dx.doi.org/10.5772/intechopen.94342*

2.Responsive CSR is an imitative CSR strategy where the firm is involved in CSR activities responding to specific regulations and stakeholders' pressure. In calls for tenders, governments may prefer socially responsible firms.

This dichotomous approach of CSR strategies could be biased. Many firms could display a strategic CSR in some areas and a responsive CSR in other areas. The literature on how to identify them is still scarce.

We also shed light on the key role of CSR committees on CSR performance and the implementation of strategic CSR policies [22, 23, 25] and how they could decrease CSR risks [22, 23]. We notice that diversity on board committees in not yet fully explored, more diverse boards lead to the creation of more diverse committees and the emerging studies on CSRC diversity provide some empirical evidence that heterogeneity in CSRC is likely to favor strategic CSR.

In line with dependence resource theory, this chapter concludes that more inclusive nomination policies could help the company to get access to new opportunities through a better understanding of the market expectations and deployment of more resources [9], specifically in high uncertainty contexts, where diverse teams could be more successful [20, 21].
