Do the Poor Benefit from Corporate Social Responsibility? A Theory-Based Impact Evaluation of Six Community-Based Water Projects in Sri Lanka

IEE Working Paper, Institute of Development Research and Development Policy, Ruhr-University Bochum, Germany

101 Pages Posted: 6 Jun 2015

See all articles by Wilhelm Loewenstein

Wilhelm Loewenstein

Ruhr University of Bochum - Institute of Development Research and Development Policy; Ruhr University of Bochum - Faculty of Economics

Martina Shakya

Institute of Development Research and Development Policy

Marc Hansen

Ruhr University of Bochum - Institute of Development Research and Development Policy

Sanjay Gorkhali

Independent

Date Written: June 4, 2015

Abstract

Corporate Social Responsibility (CSR) can work as an effective means towards minimising business risk and maintaining amicable relationships with diverse groups of stakeholders. While many studies have examined the impacts of CSR on firm value and customer perceptions, little is known about the effects of a philanthropic engagement of the private sector on external stakeholder groups, such as local communities in developing countries. This paper examines welfare effects of six community-based water supply projects that were supported by a thermal power plant in Sri Lanka as part of the company's CSR strategy. The implications of these CSR activities are analysed from the perspective of the project beneficiaries, the majority of them poor smallholder farmers. Household production and labour income functions are estimated from survey data to analyse two pathways through which the water projects affect the beneficiaries' lives. First, the households get individual access to water that allows for the irrigation of home gardens, increases land productivity and changes households' farm output and income (irrigation channel). Second, the projects have an indirect effect on households' income via a time channel, i.e. the effect that due to the individual water access the households save time as there is no need any more to fetch water from far away water bodies or wells. This allows for a reallocation of labour time for other productive income-generating activities. Despite the considerable costs that households have to bear for an individual water connection, the study finds a systematic, positive net income effect of the projects on the beneficiaries via both the irrigation and the time channel. Qualitative evidence supports these findings and also reveals additional positive, non-monetarised project impacts. As the water projects would not have been realised without the subsidiary financial support of the power plant, it is concluded that the company's CSR engagement is increasing the welfare of the beneficiary communities.

Keywords: Corporate Social Responsibility; Productivity Method; Theory-based Impact Evaluation; Club Goods; Stakeholder; Smallholder Farmers; Community-Based Water Supply; Sri Lanka; Welfare Changes

JEL Classification: D13, D61, H41, H42, H43, M14, Q12

Suggested Citation

Loewenstein, Wilhelm and Shakya, Martina and Hansen, Marc and Gorkhali, Sanjay, Do the Poor Benefit from Corporate Social Responsibility? A Theory-Based Impact Evaluation of Six Community-Based Water Projects in Sri Lanka (June 4, 2015). IEE Working Paper, Institute of Development Research and Development Policy, Ruhr-University Bochum, Germany, Available at SSRN: https://ssrn.com/abstract=2614488 or http://dx.doi.org/10.2139/ssrn.2614488

Wilhelm Loewenstein (Contact Author)

Ruhr University of Bochum - Institute of Development Research and Development Policy ( email )

Building GB, Room 1/59
Bochum, D-44801
Germany

HOME PAGE: http://development-research.org

Ruhr University of Bochum - Faculty of Economics ( email )

Ruhr University of Bochum
Faculty of Economics
D-44780 Bochum, DE 44780
Germany

Martina Shakya

Institute of Development Research and Development Policy ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

HOME PAGE: http://Development-Research.org

Marc Hansen

Ruhr University of Bochum - Institute of Development Research and Development Policy ( email )

Building GB, Room 1/59
Bochum, D-44801
Germany

Sanjay Gorkhali

Independent ( email )

Kuleshore
Kathmandu
Nepal

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
224
Abstract Views
1,399
Rank
247,469
PlumX Metrics