The Economics of Corporate Social Responsibility
Corporate social responsibility (CSR) refers to the voluntary decision of companies to address social and environmental concerns by contributing to a public good, reducing external costs, and increasing fairness or distributional equity. CSR is looked at from an economic point of view, focusing on environmental and natural resource issues with a particular emphasis on water. The term CSR is first clarified and contextualized before being situated in the economics literature. This note studies CSR from an economic angle, and looks at how it is in line with economic incentives. It focuses on: (1) the extent to which there is a need for CSR in terms of the characteristics of the economic environment that make CSR policies effective; and (2) how CSR policies interact with firms' operations and profit maximization. This technical note supports cases in the Darden course elective, "The Global Economics of Water."