Building trust with material and immaterial corporate social responsibility: Benefits and consequences
Our researchers
Summary
How companies invest in corporate social responsibility (CSR) has implications for how much stakeholders trust them. This study explores whether “material” CSR activities (closely connected to a company’s core business, like sustainable supply chains) and “immaterial” CSR (such as philanthropy or charitable donations) have different effects on trust.
The research shows that material CSR builds competence trust—investors believe the company is capable and effective—while immaterial CSR builds integrity trust—investors see the company as ethical and principled. However, these trust types play out differently when things go wrong. Material CSR cushions investor reactions when a company makes an honest mistake, but does little to help when fraud occurs. Surprisingly, immaterial CSR can actually backfire in fraud cases, leading to harsher investor judgment.
For companies, this means CSR is not “one size fits all.” The kind of CSR matters, as does the kind of crisis a company faces.
Takeaways for standard-setters and regulators
- Strengthen focus on material CSR disclosure – Findings support SASB, IIRC, and FRC efforts to promote disclosures of CSR activities tied to core operations, ensuring decision-useful information for integrated reporting.
- Incorporate double materiality and integrity trust – Evidence shows immaterial CSR builds integrity trust, offering valuable insights for standard setters as they refine the concept of double materiality in sustainability reporting.
Takeaways for companies
- Align CSR with core operations – Material CSR (e.g., sustainability in supply chains or product design) strengthens competence trust and helps protect reputation when honest mistakes occur.
- Be strategic with immaterial CSR – While philanthropy and community initiatives build integrity and trust, they can amplify negative reactions if fraud or misconduct emerges.
- Balance trust-building with risk management – Different CSR types offer different benefits and risks; companies should design CSR portfolios with both trust-building and crisis scenarios in mind.
Implications for research
Distinguishing CSR by materiality
Future research should move beyond treating CSR as a single construct and instead differentiate between material and immaterial CSR. This distinction highlights that CSR activities linked to a company’s core operations and those that are more peripheral generate different types of trust (competence vs. integrity). Researchers can build on this by exploring how materiality shapes stakeholder perceptions across other contexts, industries, and geographies.
Dual dimensions of trust in corporate settings
The study demonstrates that competence trust and integrity trust are distinct mechanisms that explain how stakeholders evaluate firms. This opens the door for further inquiry into how these two trust dimensions evolve over time, how they interact with other organizational signals (like governance quality or executive communication), and how they influence stakeholder decisions under varying conditions of uncertainty.
CSR and crisis management dynamics
By showing that CSR can both buffer and backfire depending on the nature of a corporate crisis (error vs. fraud), the research invites further investigation into the boundary conditions of CSR’s protective role. Scholars could examine factors such as industry reputation, media framing, or cultural context to better understand when CSR acts as a shield and when it becomes a liability.