Strategic vs. altruistic Corporate Social Responsibility

The concept of Corporate Social Responsibility (CSR) has evolved since Milton Friedman's 1970 assertion that a business's sole responsibility is profit. Today, global frameworks like the UN Global Compact and EU regulations emphasize corporate accountability, particularly regarding social and environmental impacts. Corporate Social Responsibility (CSR) has become central in discussions of firm behavior, governance, and public goods provision. CSR however varies across firms. Some adopt basic strategic CSR (b-CSR), considering social and environmental issues only to the extent that they affect consumer demand and profitability. Others practice environmentally committed CSR (e-CSR), internalizing the full social cost of emissions. A few pursue fully committed CSR (w-CSR), aiming to maximize overall social welfare. The paper analyzes CSR's effects on firm behavior through economic modeling. It first examines a single firm producing CO2 emissions, where reducing emissions increases costs but appeals to environmentally conscious consumers. Three firm types—b-CSR, e-CSR, and w-CSR—are considered. The study then extends to a competitive market with two firms engaged in Cournot competition. It examines scenarios where firms have different CSR commitments, analyzing how competition, emissions, and profits are affected. Finally, the paper compares these outcomes to an ideal scenario where firms are regulated to maximize social welfare.