Corporate Social Responsibility and the Environment: A Theoretical Perspective

This article surveys the growing theoretical literature on the motives for and welfare effects of environmental corporate social responsibility (CSR). We show how both market and nonmarket forces are making environmental CSR profitable, and also discuss altruistic CSR. In particular, nongovernmental organizations strongly influence CSR activities, through both public and private politics. CSR can have varied effects, from attracting green consumers or investors, to preempting government regulation, to encouraging regulation that burdens rivals. Welfare effects of CSR are subtle, and there is no guarantee that CSR enhances social welfare. We identify numerous areas in which additional theoretical work is needed.