[CSR Public Opinion Brief No. 5] Corporate Social Responsibility in an Era of Economic Crisis 2

[CSR Public Opinion Brief No. 5]

1. Corporate Social Responsibility in an Era of Economic Crisis / International Comparison: Diversity in CSR Perceptions

2. Changes in CSR Perceptions in Korea and the Potential for Strategic CSR / [Appendix] Characteristics of CSR Survey Results in China, the US, and Japan

Changes in CSR Perceptions in Korea and the Potential for Strategic CSR

Large Corporations' CSR: "Need for Comprehensive Social Responsibility Activities Beyond Philanthropy"

Product safety and eco-friendliness are basic; demands for job creation and poverty alleviation are increasing due to the economic crisis.

This survey investigated the scope of social responsibility expected from large corporations by the Korean public. The 14 survey items broadly cover various areas of social responsibility, including environmental aspects such as using eco-friendly materials and adhering to eco-friendly production processes; employment aspects such as investing in local community education and training, job creation, and non-discrimination in hiring; social aspects such as poverty alleviation, public safety, charity, and social welfare; global aspects emphasizing ethical and human rights management for companies operating overseas; and political aspects such as supporting government reform policies.

The prioritization of each item by the public reveals a very broad scope of social responsibility expected from large corporations. For 11 out of the 14 survey items, the response rate exceeded 50%. These 11 items range from demands for producing affordable, high-quality products to contributing to job creation and economic stability. However, an analysis of the priorities assigned to each item by the public allows for a distinction between the importance of various social responsibility activities.

When the concept of corporate social responsibility was first introduced, domestic companies and consumers tended to understand it primarily as corporate charity or social welfare activities. However, the survey results show that while the proportion of respondents who consider charity and social welfare as social responsibility remains high at 64%, it ranks sixth overall. This indicates that the public's understanding of CSR has moved beyond mere philanthropic or social contribution activities.

The public places the highest priority on product 'safety' and 'eco-friendliness.' Maintaining product safety (89%), using eco-friendly materials (87%), and considering environmental and social responsibility during the production process (85%) all received high support, exceeding 80%. Notably, the items concerning maintaining product safety and using eco-friendly materials saw an increase of about 10 percentage points compared to the 2007 survey. This is likely a reflection of recent societal shocks from food contamination scandals and the seriousness of environmental issues.

Due to the economic crisis, expectations for large corporations' social responsibility activities in the economic sphere were high. The response rate indicating that increasing domestic employment is a significant responsibility for large corporations was high at 72%. Support for local community education and vocational training was 61%. Demands for contributing to global economic stability and reducing the wealth gap were 59% each. Notably, the demand to contribute to reducing the wealth gap showed the largest increase among all survey items, rising by 12 percentage points compared to 2007. This suggests that the public has high expectations for corporations to mitigate and resolve the impacts of the economic crisis.

Compared to the 2007 survey results, only 3 out of 12 common items showed a decrease in response. These three items were: treating job applicants fairly in hiring, applying strict ethical standards uniformly worldwide, and supporting government reform policies and legislation. Specifically, treating all job applicants fairly showed the largest decrease, falling by approximately 14 percentage points. These items are generally related to corporate ethics and are relatively less connected to tangible economic contributions.

The social responsibility of large corporations is not limited to mere philanthropy or donation activities. Public expectations have already far surpassed that level. Instead, there are demands to pay more attention to consumer safety and the environment from the product manufacturing stage. Simultaneously, contributing to overcoming the economic crisis is the primary content of social responsibility activities that the public expects from large corporations. From a corporate perspective, these public expectations can be a sign of support but also signify an increased burden.

[Table 1] Corporate Social Responsibility: "Strongly Agree + Slightly Agree" (%)

Prerequisite for Strategic CSR: Ethical Consumer Behavior

The concept of 'Strategic CSR,' which argues that companies should actively engage in CSR not only because it is desirable but also as a means of generating new profits, is gaining prominence. However, for strategic CSR to be feasible, several conditions must be met. At the investment level, Social Responsibility Investment (SRI), where CSR performance becomes an investment criterion, must be active. At the consumption level, a culture must be established where consumers incentivize or penalize companies based on their CSR activities by purchasing or boycotting products from specific companies. Without these mature conditions, it is difficult for companies to pursue strategic CSR activities, as they are not directly linked to profit generation.

Spread of Ethical Consumerism

"Preferentially purchase products/services from companies with strong CSR" 93%

To gauge the extent of Korean citizens' active intention towards ethical consumer behavior, we asked about their agreement with the statement: 'I try to buy products or services from companies that fulfill their social and environmental responsibilities whenever possible.' The 'Agree' response was 93% (Strongly Agree 72.1% + Somewhat Agree 20.8%), overwhelmingly surpassing the 'Disagree' response of 7% (Strongly Disagree 2.5% + Somewhat Disagree 4.1%).

[Figure 1] Intention to Use Products and Services from Companies Fulfilling Social Responsibility (%)

"Sufficient availability of CSR products/services to choose from" Increased from 38% in 2002 to 52% in 2009

When asked about the sufficiency of products or services made with consideration for social responsibility from a consumer's perspective, the 'Sufficient' response rate was 52% (Strongly Agree 11.6% + Somewhat Agree 40.2%), a majority. Although this is lower compared to other OECD countries, it represents an increase of over 14 percentage points from 38% in the 2002 survey. This confirms that the proportion of products and services incorporating CSR is continuously expanding due to growing societal interest in CSR.

[Figure 2] "Sufficient availability of products/services made with consideration for social responsibility" (%)

Confidence in Consumer Behavior

Regarding the question of whether consumers can influence how responsibly companies act, 69% responded 'Yes' (Strongly Agree 28.7% + Somewhat Agree 39.8%). Conversely, only 31% responded 'No' (Strongly Disagree 8.1% + Somewhat Disagree 23.2%). This indicates a degree of confidence in consumer behavior related to CSR.

Specifically, when asked about the experience of purchasing products from companies perceived to be socially responsible or recommending them to others, the proportion of respondents who had 'actually done so' rapidly increased from 13% in the 2002 survey, to 34% in the 2007 survey, and to 45% in the current survey. In this survey, 37% 'considered it but did not act,' while only 18% 'never considered it.' For negative consumer actions, such as boycotting products from companies with poor social responsibility or criticizing them, the proportion of those who had practiced this increased sharply from 15% in 2005, to 27% in 2007, and to 39% in 2009. These results confirm that the high confidence of Korean consumers in CSR is being reinforced by actual consumer action.

[Figure 3] Consumers can influence companies' social responsibility activities (%)

[Figure 4] Changes in Experience of Purchasing/Recommending Companies with Good CSR 2002-2009 (%)

[Figure 5] Changes in Experience of Boycotting/Criticizing Companies with Poor CSR 2002-2009 (%)

CSR Reputation by Company and Industry

Polarization of CSR Corporate Image: "Samsung is good at it, and Samsung is bad at it."

Samsung ranked first both as a company that does CSR well and as a company that does CSR poorly. This reflects the polarized views of the Korean public towards Samsung. While Samsung dropped to second place in 2008 for doing CSR well, it regained the top spot in 2009 with a 44.2% support rate (sum of 1st and 2nd preferences). Microsoft (MS) ranked second for doing CSR well, and Yuhan/Yuhan-Kimberly, which ranked first in the 2008 survey, slightly dropped to third place in 2009. This is likely due to the issue of illegal donations, which was frequently reported in the media, subsiding, and the increased expectations for large corporations' roles during the economic crisis, following Samsung's consistent high support in previous years.

Similarly, Hyundai Motor, which received a community service order for tax evasion allegations, entered the top 5 for the first time while also ranking second among companies perceived to do CSR poorly. LG, as a domestic company, has consistently been in the Best 5 alongside Samsung each year without appearing on the negative corporate rankings, suggesting relatively successful CSR image management. Meanwhile, while the number of domestic companies on the list is increasing year by year, MS (Microsoft) maintaining its second-place position among foreign companies indicates its continued positive reputation among the Korean public.

[Table 2] Top 5 CSR Companies (Sum of 1st and 2nd preferences - multiple responses allowed)

* For Yuhan, many citizens do not distinguish between Yuhan Corporation and Yuhan-Kimberly, so they are aggregated.

On the other hand, regarding companies perceived to perform poorly in social responsibility, companies like McDonald's and Coca-Cola have historically received negative CSR evaluations, reflecting consumer concerns about instant food. However, in the 2009 survey, leading companies such as Samsung and Hyundai Motor, whose executives faced investigations for illegal donations or slush funds in recent years, ranked first and second in negative evaluations. Lotte, which faced controversy over the construction of Lotte World, ranked fourth. Daewoo has consistently appeared in the top 5 for negative evaluations almost every year. Considering that no specific issues have been highlighted recently, this is interpreted as the lingering negative image from the 1997 IMF crisis. This suggests how significantly a company's image can be damaged by a stigma effect once it is perceived negatively by the public. Among foreign companies, GM, which faced concerns about bankruptcy, was listed. The cases of Daewoo and GM demonstrate that poor business performance can lead to a decline in CSR evaluations.

[Table 3] Top 5 Worst CSR Companies (Sum of 1st and 2nd preferences - multiple responses allowed)

CSR Evaluation by Industry: High-tech IT Industry Ranked First Positively, Tobacco Companies Ranked First Negatively

By industry, high-tech IT industries, which are core areas of national competitiveness or have little direct relation to environmental issues, as well as energy and information/communication related industries such as electricity and telecommunications, received positive evaluations. Apparel and pharmaceutical companies also appear to have a positive image among the public. However, negative images were confirmed for companies in sectors directly related to public health and food, such as tobacco and food companies, or those with potential environmental impact, such as oil refining and chemical companies.

Notably, the very negative CSR evaluations for banks and the financial sector are noteworthy. This may reflect the fact that issues concerning banks and the financial sector have frequently emerged alongside corporate scandals or problems with failing companies, or it may be understood as a result of banks and financial institutions still being perceived as institutions difficult for the general public to access.

[Table 4] Top 5 CSR Industries (Sum of "Better than Average" responses)

* Electricity was newly added in 2009.

Note: The figures represent the sum of responses for "Much Better" and "Slightly Better" out of "Much Better," "Slightly Better," "Average," "Slightly Worse," and "Much Worse."

[Table 5] Top 5 Worst CSR Industries (Sum of "Worse than Average" responses)

Note: The figures represent the sum of responses for "Much Worse" and "Slightly Worse" out of "Much Better," "Slightly Better," "Average," "Slightly Worse," and "Much Worse."

SRI (Social Responsibility Investment) in Korea: Still a Long Way to Go

While it is true that consumers show a high intention and growing confidence in ethical consumption behavior based on CSR, there are still perceived limitations in Korean society that hinder the full-scale development of SRI.

Stock Investors: "Companies with Good CSR are Safer" 86% vs. "Management Performance is Prioritized Over CSR in Investment" 75%

Examining the relationship between social responsibility and stock investors, 86% of respondents answered that 'Investing in companies that fulfill their social responsibilities carries less risk than investing in companies that do not' (Strongly Agree 45.7%, Somewhat Agree 40.5%). This indicates a widespread perception that companies fulfilling their social responsibilities have higher management stability. This growing perception is expected to contribute to the maturation of conditions for 'Social Responsibility Investment (SRI),' which bases investment decisions on corporate social responsibility activities.

However, the perception that 'good companies are also profitable and safe' currently remains at an idealistic level. The concept of social responsibility investment has not yet become a primary criterion for Korean stock investors, who prioritize management performance and returns. In this survey, a significant 75% of stock investors (49.5% of all respondents), who engage in direct or indirect stock investments, answered that 'Management performance is more important than whether a company complies with its social and environmental obligations' (Strongly Agree 31.7%, Somewhat Agree 43.4%). If there are issues with management performance and profitability, the consideration of social responsibility activities becomes a secondary factor.

This demonstrates a realistic attitude where, in reality, when the ideal principle of investing in good companies conflicts with the practical benefit of returns, profit takes precedence. Even in developed countries like the United States, whether the returns of socially responsible investment funds are superior to those of general funds remains a subject of debate. The fact that many of the representative companies facing or at risk of bankruptcy in the aftermath of the recent economic crisis are those that were highly rated for their social responsibility activities further reinforces this realistic attitude.

Cases of Lehman Brothers and GM, which received positive CSR evaluations, raise concerns about "Social Responsibility Investment (SRI)"

Lehman Brothers received the 'Guangming CSR Award' hosted by the Chinese government and its official newspaper, Guangming Daily, in 2007. GM, currently facing bankruptcy, also received the 'Award of Corporate Excellence' from the U.S. Department of State for its overseas CSR activities. While there have been expectations that companies with strong CSR performance would ideally lead to risk avoidance and good returns, it is a significant challenge to discern truly CSR-proficient companies from those adept at CSR promotion. This is a crucial hurdle that must be overcome for social responsibility investment to establish itself as a viable investment principle in Korean society.

[Figure 6] Investing in companies with good CSR reduces investment risk (%) - Stock Investors (494 respondents)

[Figure 7] "Management performance is more important than CSR" (%) - Stock Investors (494 respondents)

[Appendix] Characteristics of CSR Survey Results in China, the US, and Japan

1. United States

The American public demonstrated a strong willingness to engage with Corporate Social Responsibility (CSR). Specifically, they were proactive in purchasing or recommending products from companies that fulfilled their social responsibilities, and equally active in boycotting or criticizing those that did not. This indicates a strong inclination towards ethical consumer behavior.

□ Regarding the statement, "I try to use products or services from companies that are socially and environmentally responsible whenever possible," 89% responded affirmatively, while 10% responded negatively.

□ For the statement, "As a consumer, there are sufficient products and services made according to social responsibility," 63% agreed, while 35% disagreed. This suggests that products and services made according to social responsibility do not meet the public's demand level.

□ Concerning the statement, "As a consumer, I can influence how much companies act according to social responsibility," 76% responded affirmatively, a high level, while 23% responded negatively.

□ For the statement, "I purchase products from companies that fulfill their social responsibilities or recommend them to others," 59% reported having experience with this action. 16% had only considered it, and 24% had never even thought about it.

□ Regarding the statement, "I have boycotted products from companies that do not fulfill their social responsibilities or criticized them to others," 62% reported having experience with this action. 13% had only considered it, and 25% had never even thought about it.

□ For the "social responsibility of large corporations to contribute to the social community," education and training received the highest response rate at 38%. Environment followed at 19%, and health at 14%. Arts and culture was the lowest at 2%.

2. China

The Chinese public exhibited a strong sense of confidence or proactiveness regarding CSR. However, their actions in purchasing or boycotting based on corporate social responsibility were at a low level. In terms of large corporations' contributions to the social community, environmental and educational/training aspects, as well as health and public safety, received relatively balanced response rates. This indicates that while the willingness towards CSR is strong, actions and expectations do not align with this willingness.

□ Regarding the statement, "I try to use products or services from companies that are socially and environmentally responsible whenever possible," 92% responded affirmatively, with only 7% responding negatively.

□ For the statement, "As a consumer, there are sufficient products and services made according to social responsibility," 75% assessed it as sufficient, a high level, while only 23% disagreed. This suggests that even if products and services made according to social responsibility are not entirely satisfactory, they exist in the market at a high proportion.

□ Concerning the statement, "As a consumer, I can influence how much companies act according to social responsibility," 81% responded affirmatively, a high level, while 16% responded negatively.

□ For the statement, "I purchase products from companies that fulfill their social responsibilities or recommend them to others," only 25% reported having experience with this action, a low level. 35% had only considered it, and 40% had never even thought about it.

□ Regarding the statement, "I have boycotted products from companies that do not fulfill their social responsibilities or criticized them to others," 34% reported having experience with this action. 33% had only considered it, and 33% had never even thought about it.

□ For the "social responsibility of large corporations to contribute to the social community," environment and education/training were the highest at 22% each. Health was also high at 21%. Public safety was 13%. Arts and culture was the lowest at 4%.

3. Japan

Compared to other countries, the Japanese public held a relatively passive stance towards CSR. However, this passivity does not extend to the level of awareness. While the proportion of respondents who had acted upon CSR or lack thereof was low, the proportion who had considered it was high. A notable characteristic is that the response rate for environment as a contribution area for large corporations to the social community was 44%, higher than in any other country. Poverty was also cited at a high rate of 25%.

□ Regarding the statement, "I try to use products or services from companies that are socially and environmentally responsible whenever possible," 79% responded affirmatively, while 21% responded negatively. While the agreement rate is absolutely high, it is relatively low when compared to the results from other countries.

□ For the statement, "As a consumer, there are sufficient products and services made according to social responsibility," 58% assessed it as sufficient, while 42% disagreed.

□ Concerning the statement, "As a consumer, I can influence how much companies act according to social responsibility," 53% responded affirmatively, while 47% responded negatively. This result shows a passive characteristic compared to other countries.

□ For the statement, "I purchase products from companies that fulfill their social responsibilities or recommend them to others," only 20% reported having experience with this action, a low level. 50% had only considered it, a high proportion. 31% had never even thought about it.

□ Regarding the statement, "I have boycotted products from companies that do not fulfill their social responsibilities or criticized them to others," 31% reported having experience with this action. 42% had only considered it, and 27% had never even thought about it.

□ For the "social responsibility of large corporations to contribute to the social community," environment was the highest at 44%, followed by poverty at 25%. Education and training was cited by 19%. Arts and culture was the lowest at 2%.

[Figure 1] Purchase intention for products and services considering social and environmental responsibility (%)

[Figure 2] Supply of products and services considering social responsibility "Sufficient" (%)

[Figure 3] Perception of ability to influence corporate social responsibility (%)

* Do not mark as unknown/no response.

[Figure 4] Experience purchasing products from socially responsible companies or recommending them to others (%)

* Do not mark as unknown/no response.

[Figure 5] Experience boycotting products from socially responsible companies or criticizing them to others (%)

* Do not mark as unknown/no response.

[Figure 6] Areas of social responsibility expected from large corporations contributing to the social community (%)

* Do not mark as unknown/no response.