The issue of corporate social responsibility (CSR) dates back to the 1950s when academics and corporate leaders began to recognize and articulate the impact of corporations on society.

At the moment, numerous constituency groups recognize the pervasive effects business has in such areas as the community and the environment, in addition to the economy. Now more than ever, demands are being placed on business to work for a positive impact on society.

Public expectations of corporations have risen: corporations are no longer expected only to obey laws, but also to be accountable to lofty principles and values like economic justice, human rights and environmental stewardship.

CSR is a mechanism for organisations to voluntarily integrate social and environmental concerns into their operations and their interaction with their stakeholders, which are over and above the organisation's legal responsibilities. The CSR approach accepts the existing business model and focuses on how well an organization operates within this framework.

In fact CSR involves the use of proactive strategies, like creating new business practices to initiate change. Ironically, by sticking its neck out in the support of certain causes or values, a CSR company may actually increase rather than minimize its risk, depending upon which causes or values it elects to support.

Many western companies have also used CSR as an effective marketing tool to enhance their reputations. Several critics have reported that companies have used CSR programs as a means to effectively deflect criticism or public outcry when they err.

The CSR approach typically defines stakeholders more broadly and is more concerned with the company's responsibility to the community. Such an approach recognizes a contractual bond between business and society, whereby society provides essential resources to businesses in exchange for social benefits.

Companies that demonstrate a commitment to social responsibility are likely to enjoy comparative advantage in the long run. Increasingly, companies that fail to maintain adequate processes to manage these issues risk damage to their reputation and consequent negative effects on their brand and image that can directly affect their financial performance.

Here the question arises: Why should corporations be socially responsible? Do socially responsible companies perform better financially? Social responsibility go hand-in-hand with superior financial performance.

A comprehensive answer to these questions is given in a meta-study--a study of studies, it rolls up years of research by various theorists, using various lenses, studying different industries, different time periods, different definitions of social responsibility, and so on. This lends such studies an outsized authority.

It is the rigorous and groundbreaking study that in October won the Moskowitz Prize of the Social Investment Forum, awarded for outstanding research in social investing.

It was conducted by Marc Orlitzky of the University of Sydney, Australia, and by Frank Schmidt and Sara Rynes from the University of Iowa. Their meta-analysis, "corporate social and financial performance," was a study of 52 studies over 30 years.

They thus reviewed in one fell swoop three decades of attempts to answer the perennial question. And they proved that a statistically significant association between corporate social performance and financial performance exists, which varies "from highly positive to modestly positive."

Researchers offered ideas on what might be behind this correlation. One theory is that CSR is an indicator of good management - a kind of flag saying sophisticated, cutting-edge managers are at work.

A second theory sees the causation going the other way: financially successful firms have more resources for social activities. The study supported both theories. In a virtuous cycle, "financially successful companies spend more because they can afford it, but [corporate social responsibility] also helps them become a bit more successful."

CSR helps companies develop new competencies because it engages employees organization-wide, calls for a "forward-thinking managerial style," and leaves responsible firms better prepared for "external changes, turbulence, and crises," study authors wrote.

It builds reputations and enhances relations with bankers and investors. It helps firms attract better employees and increase employee goodwill. It helps firms run better.

The concept of CSR is relatively new in Pakistan. Certain corporations have taken initiatives to extend support to community by diversified social works. It is high time that all corporations functioning be aware of their social responsibility towards the local community. CSR does indeed go hand-in-hand with financial performance.