Building Trust and Corporate Reputation Through CSR Communication
Abstract
Corporate social responsibility (CSR) communication has been found to have an influence on stakeholders’ perceptions, attitudes, and behaviours. It is the way companies communicate about their CSR initiatives that influence the stakeholders. However, earlier studies on the impact of CSR communication on customers’ perceptions show inconsistency in the findings. Thus, it is important to examine the relationship among CSR communication, trust, and corporate reputation from customers’ perspectives. The customer is one of the primary stakeholders whose opinions and actions can affect the future of a company. This conceptual paper discusses the relationship between CSR communication, trust, and corporate reputation. Both high levels of trust and a strong reputation are important factors that influence the sustainability of an organisation. The author reviewed literature that focuses on CSR communication, trust, and corporate reputation. The review highlights the relationship among these variables in previous studies. Future studies may want to pursue the investigation of the relationship among CSR communication, trust, and corporate reputation with the inclusion of mediating factors such as customers’ prior CSR knowledge and awareness.
Keywords: CSR Communication, CSR, Corporate Reputation, Trust
Introduction
Corporate social responsibility (CSR) refers to a set of responsibilities carried by organisations and can be divided into economic, legal, ethical, and discretionary (Carroll, 1991). In today’s competitive business environment, organisations are expected to operate the business up to social and ethical responsibilities as stakeholders are more favourable to companies that actively promote CSR. Yet, CSR initiatives must be communicated to create awareness of the companies’ contributions among stakeholders before it can be impactful. The absence of awareness would make it impossible for CSR to have influence on the stakeholders. Thus, CSR communication is growing to be the area of interest for scholars who wish to understand the importance of informing and interacting with the stakeholders about CSR. CSR communication refers to any communication designed and distributed by organisations to keep the public informed of their CSR efforts (Kim & Ferguson, 2018). One of the significances of CSR communication is it helps to modify public perceptions, attitudes and behaviours towards organisations.
Earlier, companies produced CSR reports to disclose about their CSR initiatives. Studies on CSR reporting, however, focus more on its impact on financial aspects rather than non-financial aspects such as corporate reputation. CSR initiatives have been reported through both traditional tools such as report as well as new media such as websites. However, it is obvious that CSR reports do not allow two-way communication. Scholars argued that the content and the delivery of CSR information play a role in influencing public perceptions. CSR communication is said to either enhance corporate reputation or invite criticism. It is argued that the way companies communicate about CSR effort can either build trust or lead to public distrust. This inconsistency shows the need for further examination on the relationship among CSR communication, trust and corporate reputation.
The next session reviews relevant existing literature and develop hypotheses. It is then followed by methodology of the proposed study. Finally, conclusion and suggestions for future study directions are presented.
Literature Review
CSR communication
Companies employed CSR communication to spread information about its CSR. CSR communication has become instrument for the purpose of disseminating, framing, and reporting CSR (Du et al., 2010). Number of scholars have discovered and recognized the important factors of effective CSR communication. Basic CSR information includes CSR initiatives, previous CSR outcomes and CSR motives are found to be important in improving corporate reputation (Du et al., 2010). There are also other important factors of effective CSR information such as the relevance of CSR message (Maignan & Ferrell, 2004; Morsing & Schultz, 2006), message tone (Schlegelmilch & Pollach, 2005), appropriate communication intensity (Morsing & Schultz, 2006), and adopting third-party endorsement (Morsing et al., 2008). Morsing et al. (2008) argued that direct CSR communication is ineffective compared to CSR communication endorsed by third party. The public's perceived CSR information communicated by third party as more credible which reduces public scepticism (Du et al., 2010) but most reputable organisations prefer controlled channels such as websites, press release and reports.
Transparency is also found to be one of the factors of effective CSR communication (Kim & Ferguson, 2014). Transparency associates with customers’ perceptions toward openness and fairness in organisations’ information sharing (Kim & Kim, 2017). It originated from the disclosure of corporate information which meant to reduce information discrepancies between organisations and their stakeholders (Diez & Sotorrio, 2018). The public expect companies to be transparent about their involvement in CSR so they would receive detailed information about companies’ efforts (Kim & Kim, 2017). Effective CSR communication also lies in its message content, message channel and industry- or stakeholders-specific factors (Du et al., 2010). In order to apply transparency in CSR disclosure or reporting, it is also necessary to understand the information content, its quality, as well as the channel used to reach targeted audiences.
Kim and Ferguson (2014) supported previous studies that discovered public expectations concerning CSR communication. They mentioned, first, the importance of transparency, the right message tone and the basic CSR information. Second, being consistent in providing CSR information that is relevant to the stakeholders can impact them positively. Lastly, it is also effective to use third-party endorsement in CSR communication. Their studies provide a useful guideline to practitioners of how to effectively communicate about companies’ CSR. Kim and Ferguson (2018) recommended six dimensions of CSR communication that must be taken care of by companies should they want to communicate about their CSR effectively and they are; informativeness, third-party endorsement, personal relevance, message tone, consistency and transparency. These dimensions represent the public’s expectations towards companies that wish to communicate about their CSR. Furthermore, Kim (2019) asserts that the way companies communicate their CSR should at least meet stakeholders’ expectations to make it effective which will benefit organisations. Effective CSR communication is crucial to improve stakeholders’ cognitive and affective judgement of the company and its CSR efforts (Kim & Ferguson, 2018; Kim, 2019; Morsing, 2006).
Trust
Trust refers to a relationship in which one party has confidence in an exchange partner’s reliability and integrity (Morgan & Hunt, 1994). It is defined as the feeling that ‘those who we relate to will meet our expectations and not hurt us’ (Choudhury, 2008). Trust refers to the level of reliability guaranteed by the seller to the buyer and is recognized to be crucial to sustain positive relationship between the buyer and the seller (Song et al., 2019).
Trust affects customers’ perceptions, attitudes, and behaviours (Dang et al., 2020). Thus, being perceived as a trustworthy company is important and so companies should also focus on what it takes to build trust with their customers. Establishing a sense of trust between consumers and company significantly contributes to positive outcomes (Diallo & Lambey-Checchin, 2017). Being able to build trust among stakeholders equal to building its legitimacy to a company and both are crucial to serve its function (Bouckaert & Van de Walle, 2003).
Trust in CSR commitment is defined as an individual’s firm belief in the reliability of a corporation’s promises pertaining to its CSR initiatives (Kim, 2019). Stakeholders eventually developed their trust towards a company based on their evaluations on the company’s values and ethics (Dirks & Ferrin, 2002). Customers who are aware of a company's socially responsible practices will develop trust towards quality standard of product or service offered by the same company. Companies must be reminded that stakeholders’ trust is usually shattered due to the corporation’s failure to deliver their promises. When a relationship between consumer and company is based on trust, the consumer’s belief that a company will act in the best interests of its customers while keeping its promises (Kim & Kim, 2017).
Furthermore, stakeholders who perceive high involvement of their corporation in CSR activities believe that the corporation is also ethical in dealing with stakeholders. CSR can induce a positive attitude such as trust that leads to good opinions of the corporation (Pivato et al., 2007). However, the present study argues that CSR must be communicated before they can induce positive attitudes before CSR itself can leave an impact on stakeholders. Ahmad (2016) argued that continuous engagement with stakeholders is important to develop trust and support towards companies’ CSR efforts. Stakeholders’ trust towards a corporation can be developed and enhanced by establishing a dialogue.
Corporate reputation
Corporate reputation has been said to be the most valuable intangible asset to a company. Strong corporate reputation helps companies to survive and succeed. Hence, companies are left with no choice but to put efforts on managing their corporate reputation. Besides corporate ability, customer satisfaction and customer trust, CSR is also among antecedents of corporate reputation (Kim & Kim, 2017). CSR has been found to influence corporate reputation from both internal and external stakeholders’ perspectives. Javed et al. (2020) who examine the effects of CSR from the perspective of managers found that socially responsible initiatives significantly and positively influence both corporate reputation and financial performance. Park (2019) found that CSR, customers’ attitudes, and customers’ satisfaction improves the corporate reputation of the airline industry.
Studies on corporate reputation are also paying attention to the effects of CSR communication and CSR disclosure on corporate reputation. Ajayi and Mmutle (2021) found that the right CSR communication strategies and channels have helped reputable companies in managing their corporate reputation. Transparent CSR disclosure on the website and news media coverage of CSR also leads to strong corporate reputation (Anastasia et al., 2018; Vogler & Eisenegger, 2021). All studies mentioned above show that those antecedents of corporate reputation can be planned and improved internally.
Preliminary studies also proved that corporate reputation has its influence on the stakeholders and the companies’ overall performance. Deniz (2020) in his study found that employees’ positive perceptions of corporate reputation correlates negatively with turnover intention. The way employees perceive corporate reputation influences their relationship with the organisation, employees’ individual performance and organisational commitment (Almeida & Coelho, 2019). Favourable corporate reputation also influences bank selection among customers (Narteh & Braimah, 2019). These studies proved that corporate reputation influences both internal and external stakeholders’ decisions. Their decisions then can influence a company’s performance.
Based on latest contributions in literature, scholars also considered corporate reputation to be a mediator or moderator in their studies. The strength of the association between CSR and organisational performance differed by the degree to which stakeholders valued corporate reputation (Singh & Misra, 2021). Pham and Tran (2020) found corporate reputation mediates the relationship between CSR disclosure and company’s financial performance. Corporate reputation is not just a direct outcome of CSR but also found to be a mediating mechanism between CSR and organisational commitment (Soriano & Castano, 2020). Even though these studies show that corporate reputation is the consequence of CSR and in turn can influence a company’s performance, there is a need to investigate if communication aspect of CSR play a role in improving corporate reputation.
Corporate communication and trust
One of many possible ways for CSR initiatives to be impactful is to make sure stakeholders’ awareness of the organisations’ good deeds (Yadav et al., 2018). Previous studies agreed upon effective CSR communication influence stakeholders’ CSR knowledge or awareness, engagement, trust and perceived corporate reputation (Kim & Ferguson, 2014; Morsing & Schultz, 2006; Pomering & Dolnicar, 2009). However, organisations should go beyond ‘informing’ if they are aiming at developing trust and accountability (Golob & Podnar, 2011). It is important to understand the strategies or approaches to engage with stakeholders when conducting CSR issues in specific industries with a minimal societal impact (Taghian et al., 2015). Being transparent, for instance, is one basic condition for organisations to strategically communicate its CSR information which is intended to influence stakeholders’ trust (Kim & Lee, 2018).
Customers believe that organisations that are committed toward CSR are also socially and ethically responsible (Kim, 2019). Stakeholders’ trust towards organization can be developed and improved through effective dialogue initiated by the organization (Bentele & Nothhaft, 2011). Ahmad (2016) argued that continuous engagement with stakeholders is important to develop trust and support towards organisations’ CSR efforts.
Oppositely, the increased distrust in CSR context is usually a consequence of incomplete information being communicated to the stakeholders (Kim, 2019) while organisations that provide high quality information on their websites are perceived as trustworthy (Kim & Kim, 2017). They also suggested that organisations should practise transparency in CSR communication if they attempted to prevent customer scepticism. Transparency is imperative to enhance trust (Rawlins, 2008). The more information available to consumers about an organisation’s CSR, the less likely they are to be sceptical about CSR efforts carried out by the organisation. Information pertaining CSR contributions are probable to induce strong yet positive responses among stakeholders (Morsing & Schultz, 2006).
Stakeholders who perceive high involvement of their organisation in CSR initiatives are confident that the organisation is also ethical in dealing with stakeholders. CSR can induce positive feelings which eventually leads to trust development and possibly to have positive evaluations of the organisation (Pivato et al., 2007). However, the present study argues that CSR must be communicated before they can induce positive feelings before CSR itself can leave an impact on stakeholders. Hence, CSR communication is as crucial as CSR itself in influencing stakeholder cognition which later will also influence their attitude towards an organisation.
Morgan and Hunt (1994) proposed that communication is the antecedent of trust. Shukor (2020), in his study on Takaful agents in Malaysia emphasized trust as one powerful element that determines relationship quality between buyer and seller. Several studies have also established trust as a significant factor of marketing successes (Morgan & Hunt, 1994; Poon et al., 2017). The findings discussed from earlier studies shows that trust can be developed through communication. Stakeholders who trust an organisation are those who are equipped with knowledge related to organisations’ CSR initiatives. In turn, stakeholders’ high level of trust can diminish scepticism and produce positive evaluations of corporate reputation.
CSR communication and corporate reputation
The reason behind the implementation of CSR could vary from one company to another. Some are motivated to initiate CSR because that is how they can stand out among the same players in the industry. There are also companies that are committed to CSR and never reveal about it as they believe CSR is their responsibility. However, CSR has to be expressed through corporate communications with the intention of informing and influencing the corporation’s internal and external key stakeholders in such a way that is seen as value adding (Miles et al., 2006; Neville et al., 2005). The signalling theory explained that the act of revealing positive messages related to CSR initiatives to all stakeholders will decrease information asymmetry and help to build favourable impressions of a company (Walker, 2010). CSR communication is important for companies to attain reputation (Diez & Sotorrio, 2018) since a favourable corporate reputation has a positive impact on key stakeholders’ (such as customers, creditors, and employees) decisions, attitudes and behaviours towards the company (Song et al., 2019).
An awareness and understanding of a corporation’s CSR that an individual obtained through direct and indirect experience with the corporation can be described as CSR knowledge (Kim, 2019). CSR knowledge is important to secure the reputational benefits as an outcome of a corporation’s CSR and CSR communication. It is CSR communication that improves consumers’ CSR knowledge which in turn will have a positive impact on the way they evaluate corporate reputation (Kim, 2019). Carroll and Shabana (2010) asserts that reputation can be strengthen by engaging in CSR activities which align with stakeholders’ expectations and at the same time disclosing about the CSR activities. Companies must communicate their CSR information in a transparent manner; reliably, understandably and timely (Diez & Sotorrio, 2018). Appropriate CSR communication plays an essential role (Eisenegger & Schranz, 2011) to enable stakeholders to obtain information about CSR initiatives for this can contribute to affective dimension of reputation. Those CSR activities that are less reported may lead to a loss of reputation to corporations (Sotorrío & Sánchez, 2008). Regular disclosure of CSR activities influence corporate reputation for stakeholders will perceive a corporation’s CSR initiatives as reliable (Esen, 2013). Thus, it is important for companies to maintain and expand their communication with customers about corporations’ CSR initiatives. Customers will continue to support corporations which they know and believe have done well to the society they are operating in.
Ajayi and Mmutle (2021) in their study found that reputable companies have motives and strategies in communicating about their CSR initiatives. By applying both self-serving and society-serving motives, these companies managed to build positive perceptions among stakeholders. Instead of using interacting strategy, these companies use informing strategy as they avoid unnecessary criticisms which may occur should public discourse be encouraged. That also explains why social media is not being utilised as a platform to interact about CSR information with the public despite its interactive nature (Gomez & Chamelta, 2013). Kim and Lee (2018), on the other hand, suggested that companies can better communicate their CSR initiatives by incorporating both a low-fit cause strategy and transparency in their CSR campaign.
In the relationship between CSR reporting and CSR reputation, the stakeholders’ perception and evaluation of CSR engagement determines positive reputation (Hetze, 2016). In contrast to the common belief, Anastasia et al. (2018) found that stand-alone CSR reports do not influence corporate reputation among non-professional stakeholders. However, the same study discovered that transparent CSR disclosure on corporate websites can influence corporate reputation among this group. Corporations that initiate CSR programs and disclose these efforts in their annual reports are perceived to practise good corporate values which can be positively translated in many ways (Othman et al., 2011). However, there is also this opinion about how CSR reporting can be used for ‘greenwashing’ as a company’s attempt to hide their non-sustainable practices (Chen & Chang, 2013). Stakeholders are aware of this agenda among companies and so when corporations communicate about their CSR efforts, they are also exposing themselves for the public's condemnations that their CSR is merely for ‘greenwashing’ purpose (Bartlett, 2011).
Based on the discussion on the existing literature, it shows that there are factors of effective CSR communication that can influence the attitude of stakeholders and how they perceive corporate reputation. CSR communication itself is the key to creating awareness among stakeholders about a company's good deeds. However, mixed findings on the relationship among CSR communication, trust and corporate reputation is the foundation to the need for further investigation on the relationship among these variables.
Method
The proposed study is intended to explain the causal relationship among CSR communication, trust and corporate reputation. This is aligned with the positivist approach which infers that a researcher initiates a cause-effect relationship that stems from logic causal rules in general theory (Neuman & Robson, 2014). He also asserted that positivist social science (PSS) investigates how external factors, forces and structures that control individuals, groups, organisations or societies affect outcomes such as behaviours and attitudes.
Since the proposed study is meant to understand the relationship from the customer's perspective, the target population can be the customers of organisations that are prone to crisis such as those from oil and gas industry, airline industry or pharmaceuticals industry. Customers are the key stakeholders therefore their perceptions towards organisation is important for organisations to stay relevant in the business for a long period. Specifically, the target population must be customers who have experienced the service.
In a quantitative study, questionnaires are the common and main tool of data collection. Questionnaire allows data gathering to be accomplished in a reasonably short period of time, especially when personally distributed and collected by the researcher. In addition, researchers can decide on several approaches of doing surveys such as via telephone, mailing the questionnaire to respondent’s address or using an online platform (Wimmer & Dominick, 2013). In this study, online surveys can be utilised for data collection purposes. Structured questionnaires can be developed using google form and blasted to potential respondents.
Conclusion
Even though all stakeholders may also obtain the information from different sources, the CSR information is found to have influence on the stakeholders. The information obtained through CSR communication equips the stakeholders with knowledge which in turn will have a positive impact on the evaluations of corporate reputation (Kim, 2019). However, CSR communication is also found to have influence on stakeholders’ scepticism of CSR. Stakeholders perceive CSR reporting as a tool for ‘greenwashing’ when corporations attempted to hide their unethical practices (Chen & Chang, 2013). Stakeholders, on the other hand, aware of this agenda among corporations. So, when corporations communicate about their CSR efforts, they are also exposing themselves for the public's condemnations that their CSR is merely for ‘greenwashing’ purpose (Bartlett, 2011).
Hence, companies must strategize its CSR communication plan to communicate effectively with their stakeholders and build trust and a favourable corporate reputation. It is crucial to understand the factors of communication that can influence stakeholders’ perceptions of corporate reputation. The questions of ‘what’ and ‘how’ companies communicate must be explored from the stakeholders’ perspectives as meeting their expectations is crucial in making sure that companies’ effort to communicate is not going to waste.
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Afandi, W. N. H. W., Jamal, J., Kamal, N. M., & Alias, N. Z. I. (2023). Building Trust and Corporate Reputation Through CSR Communication. In N. M. Suki, A. R. Mazlan, R. Azmi, N. A. Abdul Rahman, Z. Adnan, N. Hanafi, & R. Truell (Eds.), Strengthening Governance, Enhancing Integrity and Navigating Communication for Future Resilient Growth, vol 132. European Proceedings of Social and Behavioural Sciences (pp. 326-336). European Publisher. https://doi.org/10.15405/epsbs.2023.11.02.24