Impact of customers’ perceptions regarding corporate social responsibility and irresponsibility in the grocery retailing industry: The role of corporate reputation

Highlights

• Customers may hold positive and negative beliefs about retailers’ CSR and CSiR.

• Corporate reputation mediates the impact of CSR perceptions on trust, equity, SOW.

• CSiR perceptions do not directly influence corporate reputation.

• CSiR perceptions negatively moderate the impact of CSR perceptions on reputation.

• CSR/CSiR perceptions are mainly driven by customer-related CSR/CSiR activities.

Abstract

Grocery retailers are making significant investments in their corporate marketing through Corporate Social Responsibility (CSR). Yet, this sector has witnessed some of the greatest cases of corporate social irresponsibility (CSiR). The purpose of this study is to investigate the mediating role of corporate reputation on the relationships between CSR/CSiR and customer trust, retailer equity, and share of wallet. As customers may hold a mixed set of positive and negative beliefs about retailers’ CSR and CSiR, this paper also explores how customers’ CSR and CSiR perceptions interact to impact corporate reputation. Based on a representative sample of 840 French customers surveyed with respect to a grocery retailer, our results show that customers’ CSR perceptions positively influence corporate reputation, but that this relationship is negatively moderated by their CSiR perceptions. Our study also highlights the mediating role of corporate reputation between CSR perceptions and customer trust, retailer equity, and share of wallet.

Introduction

During the last two decades, corporate marketing has gained prominence in academia and in practice (Balmer & Greyser, 2006). Corporate marketing is an organisational-wide philosophy that has an explicit customer, stakeholder and societal orientation, and that is informed by key organisational concepts such as corporate identity, corporate communication, and corporate reputation (Balmer, 1998, Balmer, 2009). The main goal of corporate marketing is not just profit maximization, but value creation and satisfaction of societal needs (Balmer and Greyser, 2006, Hildebrand et al., 2011). By adopting a corporate marketing logic, companies place their stakeholders, among which customers, along with societal concerns at the centre of their marketing strategy (Balmer, 1998, Powell, 2011) and aim at establishing meaningful, positive and profitable relationships with their stakeholders (Balmer, Fukukawa, & Gray, 2007).

Given this conceptualization of corporate marketing, Hildebrand et al. (2011) position Corporate Social Responsibility (CSR) at the centre of the network of concepts embraced by corporate marketing literature. CSR can be broadly conceptualized as companies’ status and activities with respect to their perceived societal obligations and key stakeholders’ interests (Brown & Dacin, 1997). The centrality of CSR to corporate marketing serves to differentiate the corporate marketing perspective within the marketing discipline (Leitch, 2017).

By incorporating CSR into their strategic corporate marketing, companies tend to differentiate from each other, to attract stakeholders’ support and to improve their corporate reputation (Balmer, 2011, Balmer et al., 2011). Corporate reputation is a perceptual construct that represents stakeholders’ overall evaluation of a company and reflects the degree to which stakeholders perceive a company as “good” or “bad” (Dowling and Moran, 2012, Roberts and Dowling, 2002). Corporate reputation thus emerges over a longer period of time as an assessment of past perceptions or images of the company (Podnar & Golob, 2017).

Research suggests that a positive reputation is essential for the corporate brand (Baalbaki & Guzmán, 2016); that it might build brand equity (Heinberg, Ozkaya, & Taube, 2018) and that it positively affects firms’ relationships with their stakeholders (Cowan & Guzman, 2020). Corporate reputation is particularly important for retailers (the focus of our research), as it has been shown as a key driver of shopping decisions (Page & Fearn, 2005).

The grocery retailing sector in France, in particular, spends a great deal of money, time, and effort on CSR-related activities, as their stakeholders, particularly customers, increasingly expect such practices (Cone Communications and Echo Research, 2015, Walsh and Bartikowski, 2013). Beyond referencing organic or local products, retailers invest in CSR initiatives such as recycling packaging (99% of leaflets are made with recycled paper; FCD, 2017), and reducing CO₂ emissions related to the transport of goods (by 14% in 2017; FCD, 2017). Since 2012, Carrefour has offered chicken that have been raised outdoors, without antibiotic treatment; System U has removed from its offering all controversial substances (including aspartame, bisphenol A, parabens); and Casino has implemented audits to control slaughter conditions and protect animal well-being. Retailers are also the leading contributors to food donations in France, with about 150 million meals offered in 2016.

By adopting CSR practices in their corporate marketing, one of the main objectives of retailers is to influence overall perceptions customers hold about the retail chain, i.e. their corporate reputation (Gupta and Pirsch, 2008, Walsh and Bartikowski, 2013). Indeed studies have highlighted a positive link between CSR and corporate reputation (Fombrun & Shanley, 1990). However, few studies have comprehensively analyzed the role of CSR in this topical area of retailing (Schramm-Klein, Zentes, Steinmann, Swoboda, & Morschett, 2016). Indeed, customer perceptions about CSR activities of retailers depend on their own CSR activities, but also on the CSR behaviors of product manufacturers and other supply chain parties.

At the same time, the retail sector in France has witnessed numerous cases of corporate social irresponsibility (CSiR), such as job cuts linked to automation of lower-skilled tasks (Monde, 2019), or decreased margins offered to suppliers and farmers (Binninger & Robert, 2011). Food scandals have also strongly impacted grocery retailers, especially in France where food accounts for 66% of hypermarket turnover and 82% of supermarket turnover (FCD, 2018). Retailers are thus often subject to negative press in mass media (Wagner, Bicen, & Hall, 2008), and scholars have highlighted the danger of CSiR by illustrating the negative reputational effects of such behaviors (Hoejmose, Roehrich, & Grosvold, 2014).

Firms engage in both CSR and CSiR simultaneously, at different levels of commitment (Cai, Jo, & Pan, 2012). While journalists and social media users often focus on publishing negative stories, companies tend to avoid the negative perspective and try to highlight their CSR activities. Although CSR scholars have often assumed that stakeholders react to CSiR in a manner that is distinct from their reactions to CSR, few studies have considered the joint impact of CSR and CSiR on stakeholders’ reactions (Price and Sun, 2017, Rotundo, 2019). As stated by Lin-Hi and Blumberg (2018), there are two largely independent debates going on in the literature: one addresses the reputational benefits of CSR and the other deals with the detrimental effects of irresponsible behaviors on corporate reputation. Thus, CSR and CSiR have scarcely been examined together to determine their magnitude of influence on corporate reputation, whether harmful or beneficial (Rotundo, 2019).

Customers may hold a mixed set of positive and negative impressions about CSR and CSiR, and the impact of these mixed beliefs on corporate reputation remain largely unresolved in the literature (Hull and Rothenberg, 2008, Lin-Hi and Blumberg, 2018, Price and Sun, 2017). While customers’ perceptions of CSR and CSiR actions are central to customers’ reactions, few studies to date have investigated the effect of customers’ perceptions of CSR and CSiR on their evaluation of corporate reputation (Rothenhoefer, 2019). The limited knowledge regarding the relationship between customers’ CSR perceptions, CSiR perceptions, and the interaction between these, on corporate reputation constitutes an important research gap in the corporate marketing literature (Murphy and Schelegelmilch, 2013, Price and Sun, 2017, Rothenhoefer, 2019)—we seek to address this gap in the current paper.

The main goal of the paper is to understand the key role played by CSR in a corporate marketing perspective in a retail context, highlighting how customers perceive CSR and CSiR actions of retailers, and how these perceptions interact to influence corporate reputation and other important marketing outcomes. Since customer responses to CSR and CSiR might be sensitive to the domain of action, we measure customers’ perceptions about different types of CSR and CSiR activities (Baskentli et al., 2019, Rotundo, 2019). Moreover, we consider customers’ overall CSR and CSiR perceptions, because when individuals form impressions of retailers they make a holistic judgment (e.g., “this retailer is doing good for the community”), which drives their behaviors (Lind, 2001).

The contribution of this study to the literature is threefold. First, it extends the literature on corporate marketing by highlighting the mediating role played by corporate reputation in the relationship between CSR perceptions and customer trust, retailer equity, and share of wallet (SOW). The effect of CSR on corporate reputation and brand equity has already been investigated (Hur et al., 2014, Lai et al., 2010); however, no research has studied the interplay between customers’ perceptions of CSR activities on corporate reputation, which in turn influence customer trust, brand equity, and SOW. Therefore, we extend previous studies by taking into account customer trust and SOW as outcome in addition to brand equity.

Second, we contribute to the literature on CSR. We capture both customers’ overall and specific CSR and CSiR perceptions as distinct constructs, to analyze their joint influence on corporate reputation. In particular, we investigate both the direct effect of customers’ overall CSR and CSiR perceptions on corporate reputation, and the moderating role of overall CSiR perceptions on the link between overall CSR perceptions and corporate reputation. Moreover, by considering customers’ perceptions about different CSR and CSiR domains as drivers of their overall CSR and CSiR perceptions, we extend previous findings that focused on a single domain (e.g., reaction to environmental actions) or on customers’ reactions to socially responsible companies in general (Baskentli et al., 2019).

Third, we develop literature on the CSR business case in the grocery retailing industry by analyzing the impacts of CSR and CSiR on retailer reputation, customer trust, retailer equity, and SOW. Clarifying how customers perceive CSR and CSiR actions can help retailers determine how their CSR programs and policies, as well as their irresponsible actions, contribute to or damage their corporate reputation.

The remainder of the paper proceeds as follows. Next, we present the conceptual framework and develop hypotheses, before describing our research method and presenting the findings. Finally, we discuss the study’s contributions, managerial implications, limitations, and directions for further research.