**1. Introduction**

Corporate Social Responsibility (CSR) is a concept that is often defined in scientific literature. Most definitions of corporate social responsibility describe CSR as a concept whereby companies voluntarily incorporate social and environmental issues into their economic activities and have interactions with stakeholders [1]. At an early stage, it was thought that CSR could only be satisfied by fulfilling responsibilities to individuals and not to society as a whole [2]. However, later, other researchers started to define CSR as a more integral concept relating to the full range of business obligations to society, including legal, economic, ethical, and other optional categories of business activity [3]. For example, CSR is defined as activities that seem to serve a particular social good, going beyond the company's interests and what is required by law [4]. They can include supporting local businesses or charities, developing recycling programs, promoting minority employment [5], adopting advanced human resource managemen<sup>t</sup> programs, and producing products which integrate social attributes [6]. Therefore, the basic concepts of corporate social responsibility are to reflect the company's total commitment to its internal stakeholders, such as employees, shareholders and external stakeholders, including suppliers, customers and the community. Thus, CSR combines economic, public, and social responsibilities. The content and goals of CSR may differ depending on the country of origin of the company.

**Citation:** Kludacz-Alessandri, M.; Cyga ´nska, M. Corporate Social Responsibility and Financial Performance among Energy Sector Companies. *Energies* **2021**, *14*, 6068. https://doi.org/10.3390/en14196068

Academic Editors: Wen-Hsien Tsai, Bartlomiej Iglinski and Michal Bernard Pietrzak

Received: 28 July 2021 Accepted: 21 September 2021 Published: 23 September 2021

**Publisher's Note:** MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

**Copyright:** © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

The implementation of CSR may depend on the macroeconomic conditions in the country [7] and the existing differences in regional economic development [8], special economic zones [9], differences in productivity, regional innovation performance, the effectiveness of labor market policy [10], and productivity convergence in the regions from which the researched companies come from [11,12].

The result of CSR is corporate social performance (CSP), defined in the literature as a configuration of CSR principles, social-response processes, programs, policies, and observable results related to the company's social relations [13]. Undoubtedly, activities in the field of CSR bring about social benefits. Still, in the literature, there is a discussion of whether they improve the financial performance of the companies and if the CSR depends on the financial performance, and empirical research in this area has not ye<sup>t</sup> reached a consensus.

A review of empirical studies on the relationship between CSR and financial performance shows that most studies treat social performance as an independent variable used to predict financial performance [14]. Approximately 50% of the studies found a positive relationship between CSR and FP [15]. The fact that CSR gives a competitive advantage translates into better financial performance is justified by the theory of instrumental stakeholders and the hypothesis of social impact. The instrumental stakeholder theory framework assumes that if the interests of multiple stakeholders of an organization are taken into account, they can improve the company's image and status. The focus on such aspects can positively affect the company's productivity, financial performance and value creation [16,17]. Inspired by this theory, the hypothesis of social impact suggests that good (bad) social outcomes generate good (bad) financial results [18,19]. It postulates that if a company satisfies its stakeholders, e.g., by implementing social projects, it will improve its image and reputation, and thus its financial results. On the other hand, if a company fails to achieve positive social impact, it will create image concerns among stakeholders, increasing costs and reducing profits [20].

Good social performance is also associated with managerial competencies and good managemen<sup>t</sup> practices, leading to good financial results. For example, large companies benefit from favorable long-term stock performance [21], and companies with substantial shareholder rights tend to have a lower cost of equity capital than their competitors [22]. Good stakeholder relations and acceptance by the community have a positive effect on the financial outcomes of the companies in the long term. For instance, building a new plant in such a case is more accessible because of lower costs through governmen<sup>t</sup> regulation; this can also obtain governmen<sup>t</sup> tax breaks [23]. Moreover, CSR can stimulate human capital accumulation. A firm that adopted CSR on a high level is usually more attractive to employees and has a low turnover, which reduces the costs of recruiting and training employees [24]. The literature describes many other different ways in which CSR adoption can affect a company's FP, e.g., CSR can positively influence a company's resources and capabilities. It can positively impact reputation, which can lower operating costs in terms of reducing waste and risks, or can positively impact employee engagemen<sup>t</sup> and productivity [25]. The four benefits of a commitment to CSR are cost reduction, competitive advantages, reputation and legitimacy building, and the search for win–win outcomes. These benefits create a solid resource base and lead to excellent financial results [26].

Other researchers (around 5%) believe that CSR adoption has a negative impact on FP [15,27]. According to them, investments in any CSR activities increase costs due to inefficient resource allocation [28,29], create conflicts of interest between stakeholders [6], thus creating unfavorable competition conditions for firms in a competitive market, and ultimately harm the company's performance. Therefore, firms which have adopted CSR bear higher expenditures and have a lower competitive advantage than companies without CSR [30]. The spending on CSR activities may therefore not be covered by the generated profits. Consequently, CSR activities have a negative effect on the company's FP [31,32]. The negative relationship of CSR–FP is theorized within the compromise hypothesis [33]. This theory is that the company must meet its different needs within a limited resource

base. Directing resources towards CSR can consume vital resources that could be used for more productive purposes. The negative relationship is also explained by the hypothesis of managerial opportunism, which assumes that the goal of managers and stakeholders may be contradictory, and in such a case, managers can only support their own interests [33].

Only a few studies regard the inverse relationship between CSR and FP, implying that FP precedes CSR and treats enterprises' CSR as a dependent variable [14]. Empirical evidence showing that better FP affects good CSR confirms the slack resource theory, according to which a financially successful company is better positioned to invest in CSR. This theory states that companies only engage in CSR when the company brings financial benefits. In this case, the firm has enough financial resources to invest in social projects. Financial success is, therefore, the main driver of CSR. The first empirical study to support this theory found that a company's social performance was positively related to the company's previous and future FP [20]. In most other studies, the relationship between social and financial performance was positive in many different contexts and sectors because the companies with better financial results spent more resources on social activities.

In turn, the negative relations between CSR and FP are justified by the hypothesis of managerial opportunism. According to this hypothesis, the more an enterprise is financially effective, the less it will be socially effective. This is explained by the fact that managers who do not achieve good financial results invest in social activities to justify their poor performance. However, when FP is high, they avoid investing in social activities to increase their private profit in the short term [33].

In conclusion, the cause-and-effect relationship between CSR and FP can veer in both directions. Most authors consider the possibility of a "virtuous circle" created by simultaneous and interactive interaction as increased CSR leads to better financial performance and vice versa [17,20].

According to some researchers, applying a corporate social responsibility strategy depends on the industry's sensitivity to the environment. Companies with production processes that harmfully affect the environment need more information than companies from other industries. Such companies include, among others, companies from the energy sector [34]. Energy companies are increasingly forced to take on greater social responsibilities, including labor rights, stakeholder engagement, environmental performance, human rights, and social impact [35]. This is mainly because the energy sector, responsible for the vast majority of emissions, requires optimization measures to reduce emissions. These activities can have different costs, application difficulties, environmental and social impacts [36]. By its nature, the energy sector plays a crucial role in sustainable development and is also a forerunner in CSR issues [37]. However, in this sector there are many varied challenges related to the managemen<sup>t</sup> and implementation of CSR. These include high costs, a lack of information and awareness, insufficient human resources, poor cooperation with stakeholders, a lack of beneficiary involvement and the integration of CSR initiatives into more extensive development plans, an excessive focus on technical and managemen<sup>t</sup> solutions [38,39].

Our study considered energy companies that are recently being forced to address a broader set of CSR and sustainability-related efforts and activities. Due to increasing demands from stakeholders related to CSR and sustainability issues, energy companies are under pressure to respond adequately to these needs and expectations, comply with national and international laws and regulations; and follow global initiatives and practices to improve sustainability performance. As a result of the environmental and social issues caused by business organizations operating in environmentally sensitive industries, the importance of CSR and sustainability-related reporting practices based on globally recognized reporting guidelines, has increased.

There is a wide range of research focusing on CSR in the context of energy. However, studies examining the relationship between CSR adoption and FP are scarce. Most of the research on the energy sector concerns the impact of CSR on financial performance. For example, other studies based on data from Thomson Reuters for 2011–2018 showed that

higher CSR performance did not guarantee better financial results, as demonstrated by both the market and accounting results [40]. Another study found that the three individual dimensions of environmental responsibility (product innovation, resource reduction, and emission reduction) were positively related to the financial performance of companies. Still, the impact of the third dimension (emission reduction) was not significant [41]. A positive effect of CSR on corporate FP was also found in a study that examined the data of 210 energy firms worldwide. These results were measured as a market capitalization value [42]. A study that used a case study approach demonstrated the link between socially responsible corporate performance and profitability [43]. Although this study did not investigate the direction of causation, the results nevertheless indicated that CSR was positively associated with a better financial performance (profitability) and the relationship was statistically significant.

In conclusion, while many efforts have been made to understand the effect of CSR on FP, the accessible empirical evidence remains ambiguous. Research on the impact of CSR activities on FP can be divided into those who support positive correlation and those whoclaim the opposite. While some studies showed that the additional revenues generated by companies from CSR exceeded the expenditures incurred, the other studies argued that the costs incurred to conduct CSR activities exceeded the profits [44].

Although the existing research considers CSR in the context of the energy industry from many different perspectives, and despite its general importance in the energy sector, most studies concern the analysis of the impact of CSR on FP. The inverse link of FP–CSR in the energy sector is underrepresented in this context; we found only one item treating CSR as a dependent variable. The analysis of panel data for 14 companies from the energy sector for the years 1991 and 2009 carried out by Pätäri et al. [25] aimed to examine whether investments in CSR affected corporate financial performance and the reverse relationship. CSR was measured here using two separate constructs: strengths and concerns of CSR used in the ratings provided by MSCI ESG Research. The results did not support bidirectional causality between CSR and FP. According to these results, changes in two FP indicators, ROA and return on invested capital (ROIC), did not cause Granger causality in the total number of CSR strengths or concerns. According to Nelling and Webb [5], Corporate Social Performance (CSP) seemed to derive from the unobservable characteristics of companies rather than their financial performance.

Despite a grea<sup>t</sup> interest in CSR, and especially its relationship with financial results, the results of previous studies are inconclusive. It is difficult to determine whether CSR influences FP, or whether companies that achieved financial success are more proactive in sustainable development. This means that the field is full of ambiguities. Moreover, previous researchers focused mainly on the various dimensions of CSR rather than its adoption, and, to date, little research has been conducted in the energy sector. The impact of the FP on CSR adoption in the energy sector has not been investigated so far. Therefore, our goal is to reduce this research gap.

We would like to address the research gap in the literature by examining the relationships between energy sector companies' financial performances and CSR adoption. It is worth emphasizing that the degree of linkage between CSR and FP may vary depending on the measurement of specific financial ratios. Thus, this study aims to investigate whether and to what extent various financial indicators affect the implementation of CSR strategy in companies in the energy sector. This study proposes that six different indicators can measure financial performance: ROA, ROE, EBIT, Enterprise Value to EBITDA, EBITDA per Share, and Beta coefficient. These indicators are considered the potential factors that may impact CSR adoption. The study further examines whether each of the five FP indicators positively influences the implementation of the CSR strategy in energy companies. Therefore, our research hypotheses are as follows:

**Hypothesis 1 (H1).** *ROA has a positive impact on CSR adoption among energy sector companies*.

**Hypothesis 2 (H2).** *ROE has a positive impact on CSR adoption among energy sector companies*. **Hypothesis 3 (H3).** *EBIT has a positive impact on CSR adoption among energy sector companies*.

**Hypothesis 4 (H4).** *The Enterprise Value to EBITDA ratio has a positive impact on CSR adoption among energy sector companies*.

**Hypothesis 5 (H5).** *EBITDA per Share has a positive impact on CSR adoption among energy sector companies*.

**Hypothesis 6 (H6).** *The Beta coefficient has a positive impact on CSR adoption among energy sector companies*.

This survey provides energy sector company managers with a clear insight into which kinds of financial performance are conducive to implementing a CSR strategy. The rest of the article is structured as follows. The second section describes the data collection and methodology, the third section presents the empirical results, and the final section discusses the findings and conclusions.
