Certification of Corporate Social Responsibility

“Coca Cola Busted for Greenwashing” (Zara, 2013) “Has Earth day become National Greenwash Day?” (Tarbotton, 2010) “Microsoft has best Global CSR Reputation” (O’Reilly, 2013) These are just a few of the many headlines to have passed in the last years on Corporate Social Responsibility (CSR) and its effect on reputation. It was long thought that being responsible was enough to push up profits and strengthen the reputation of the company. However, since there have been some scandals on companies that said they were acting responsible though they were actually not (the so-called “Greenwashing”), the public has been more critical. Since then, for a company to engage in CSR, it must consider all sorts of effects on its reputation. However, society does see CSR as a necessary business asset, not only as an ethical do-gooding (The Economist, 2008; Kitzmueller & Shimshack, 2012). It is clear that the threshold for a company to act responsible should not be too high for them to be discouraged or fear for their reputation. The influence of certification labels in order to qualify the CSR activities can play a key role in this matter. The effect of these certification labels on the choices regarding CSR is therefore very interesting to analyze. Models on game theory in situations of uncertainty have been used in many contexts, for example when certifying the quality of goods sold (De & Nabar, 1991). However, the overall effect of these certifications on decisions have not been looked into yet. In this paper, earlier literature on the above mentioned subjects will be analyzed. It will be seen that there are many different views on the use of CSR and the role of certification labels. Then, with use of game theoretic models, the effect of a certain accuracy of certification labels will be analyzed. Next to that, I will study the influence of the certification behavior of the companies. The results will show how a company can be triggered to engage in CSR and what the threshold is to be greenwashing their activities. How does certification of CSR activities contribute to the decisions of companies on their policies?