Corporate social responsibility in luxury contexts: potential pitfalls and how to overcome them

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ORIGINAL EMPIRICAL RESEARCH

Corporate social responsibility in luxury contexts: potential pitfalls and how to overcome them Jenni Sipilä 1

&

Sascha Alavi 2 & Laura Marie Edinger-Schons 3 & Sabrina Dörfer 2 & Christian Schmitz 2

Received: 25 October 2018 / Accepted: 2 November 2020 # The Author(s) 2020

Abstract Recent marketing research has identified mixed effects of luxury companies’ corporate social responsibility (CSR) engagement on customer-level outcomes. To gain a better understanding of these effects, we develop a conceptual framework in which we propose that, unless carefully implemented, CSR engagement leads to lower financial performance, decreased customer loyalty, and elevated extrinsic CSR attributions for luxury companies. These effects are exacerbated if consumers actively deliberate on the company’s CSR efforts. However, luxury companies can mitigate these pitfalls and reap the potential rewards of CSR engagement by (1) engaging in company-internal, especially employee-focused CSR instead of company-external, philanthropic CSR or (2) framing their brands as sustainable instead of exclusive. We find consistent support for our theorizing in five empirical studies. The results contribute to existing knowledge on stakeholder reactions to luxury brands’ CSR and can help managers successfully navigate the implementation of CSR in luxury contexts. Keywords Corporate social responsibility (CSR) . Luxury companies . Extrinsic CSR attributions . Company-internal CSR . Sustainability . Framing

Introduction In light of changing social norms and customers’ overwhelming demand for more responsible business practices (EpsteinReeves 2010), companies are increasingly engaging in corporate social responsibility (CSR) activities (Nielsen 2014). Luxury companies are no exception to this trend and have invested significantly in CSR, often in the form of philanthropic support for social causes. For example, the top 10 luxury companies in the Thomson Reuters ASSET4ESG database increased their donations by 12% from 2006 to 2011

(Thomson Reuters 2016). A similar trend is reflected in the recent CSR reports of major luxury firms: Tiffany & Co., for instance, allocated $7.9 million to charitable giving in 2016 (Tiffany and Co. 2016), Richemont donated €28 million in 2017 (Richemont 2017), and Burberry donated £22.3 million to charitable activities between 2012 and 2017 (Burberry 2017). As these figures demonstrate, luxury companies simply cannot afford to ignore the rising pressure to take greater social responsibility (Winston 2016). Yet, to date, most research on the effectiveness of CSR has been conducted in non-luxury contexts. Moreover, the few

Maura Scott served as Area Editor for this article. * Jenni Sipilä [email protected]

Christian Schmitz [email protected]

Sascha Alavi [email protected]

1

School of Business and Management, LUT University, Mukkulankatu 19, 15210 Lahti, Finland

Laura Marie Edinger-Schons [email protected]

2

Sales Management Department, Ruhr-University of Bochum, Un