Corporate Social Responsibility by Joint Agreement

Abstract

Industry-wide voluntary agreements are touted as a means for corporations to take more corporate social responsibility (CSR). We study what type of joint CSR agreement induces competitors to increase CSR efforts in a model of oligopolistic competition with differentiated products. Consumers have a willingness to pay for more responsibly manufactured products. Firms are driven by profit, and are also possibly intrinsically motivated, to invest in CSR efforts. We find that cooperative agreements directly on the level of CSR reduce CSR efforts compared to competition. Such agreements throttle both for-profit and intrinsic motivation for CSR. CSR efforts only increase if agreements are permitted solely on output. Such production agreements, however, reduce total welfare in the market and raise antitrust concerns. Taking externalities into account may help justify a production agreement under a broader welfare standard, but not agreements on CSR directly. Moreover, simply requiring a higher CSR level by regulation while preserving competition always gives higher within-market welfare.

Partially observable corporate social responsibility: The limits of differentiation

“…A more lax antitrust approach, allowing horizontal agreements among firms regarding green or ethical dimensions, would bolster green initiatives and investments, goes one side. Schinkel and Treuren (2021a) provide a non‐technical summary of the debate and evidence, stating that there is little or no ground in economics for such a more lax approach (see also Schinkel & Spiegel, 2017; Schinkel & Treuren, 2021b).…”

Partially Observable Corporate Social Responsibility: The Limits of Differentiation

“…A more lax antitrust approach, allowing horizontal agreements among firms regarding green or ethical dimensions, would bolster green initiatives and investments, goes one side. Schinkel and Treuren (2021a) provide a non-technical summary of the debate and evidence, stating that there is little or no ground in economics for such a more lax approach (see also Schinkel & Spiegel, 2017;Schinkel & Treuren, 2021b).…”

The sustainability guidelines of the Netherlands Authority for Consumers and Markets: an impetus for a modern EU approach to sustainability and competition policy reflecting the principle that the polluter pays?

“…164 Moreover, they question whether the flexibility of the benefits criterion will lead to more sustainability agreements and investments and argue that the proposed changes will lead to political decisions on redistribution by ACM. 165 Peeperkorn promotes "adopting the missing legislation and other implementing measures" as a solution instead of changing the test currently applied by the EU. 166 Furthermore, he argues that ACM is underestimating the difficulties of quantifying the damage to society.…”