Doing Good May Yield Bad Results

The conventional wisdom in the public relations business is that being a good corporate citizen is “good business.”  Companies that invest in socially responsible activities are believed to receive some payback in the form of goodwill or good publicity.

Remarkably this may not be the case.  In an article in the July issue of Harvard Business School’s “Working Knowledge” author Michael Blanding reports on the work of Harvard Prof. Felix Oberholzer-Gee, who recently produced a working paper outlining a study he performed with two people from Columbia Business School.

According to Blanding whose article is entitled, “Why Good Deeds Invite Bad Publicity,”  the study showed: “There is next to no evidence that corporate social responsibility (CSR) adds to a company’s bottom line.”

He adds that CSR is theory works like fire insurance.  “On any given day,” Blanding writes, “you won’t see any benefit.  In fact you could go years shelling out money for a service you aren’t using.  But on that day, heaven forbid, your house does burn down, then you definitely be glad you invested in insurance.”

However, this insurance analogy doesn’t really work according to Prof. Oberholzer-Gee’s working paper entitled, “No News Is Good News:  CSR Strategy and Newspaper Coverage of Negative Firm Events.”   The working paper sets out to test the insurance hypothesis by using the real-world examples of the 20 largest oil companies in the United States.  The research team collected data on several thousand oil and chemical spills, most of them quite small, over a six-year period from 2001 to 2007. They hoped to see how often the companies received negative publicity for those spills or earned “brownie points” for their superior environmental track record.

No Good Deed Goes Unpunished

The researchers hypothesized that companies with good environmental records were more likely to receive media attention in the event of a spill.  As Blanding points out, “After all, it’s not news when a company with a bad environmental record is reported to have been negligent; it’s more notable when a good company screws up.”  However, if the insurance analogy held true, the greener companies should see more favorable media coverage with the media more likely to blame the spills on bad luck or chance rather than malfeasance or negligence.

Indeed, both the environmental leaders and the environmental laggards did receive more publicity, as hypothesized.  The surprise was the debunking of the insurance analogy.  When the researchers scored the newspaper coverage and performed a textual analysis, they discovered “no difference in the tenor of the coverage for greener companies,” Blanding reports.

“Those companies with positive environmental records were criticized just as heavily as those with negative records,” he added. “…when it comes to oil spills, the goodwill “insurance policies” weren’t worth the paper they were printed on.”