When disasters strike, companies polish their image more than their operations

When a large environmental disaster caused by a corporation occurs, public attention quickly turns to the industry involved. Companies face pressure from regulators, investors, and consumers to act more responsibly. But what kind of change does this pressure produce?

In this Academic Insight, based on the research article “Demand-driven corporate social responsibility: Symbolic versus substantive change after environmental disasters” published in the Journal of Corporate Finance in 2025, it becomes clear that firms typically respond by improving their corporate social responsibility (CSR) scores. Just not in the areas most directly linked to environmental risk.

“Our findings suggest that firms often choose actions that are cheaper to implement rather than those that address the root of the problem,” says Irina Gazizova, House of Sustainable Society affiliate and coauthor of the paper. “In many cases, CSR becomes a tool for maintaining legitimacy rather than reducing risk.”

Findings: CSR responses are mostly symbolic

The study examines a set of major environmental disasters caused by firms and tracks how other firms in the same industries respond. It distinguishes between substantive CSR, which involves changes to operations that reduce risk of future harm, and symbolic CSR, which improves public perception without altering core practices.

The results show that substantive action is relatively rare. It costs more, which reduces short-term margins, but it also improves long-term credit ratings. Symbolic action, by contrast, is cheaper and still helps firms maintain investor support, without requiring operational change.

This creates a clear trade-off. Firms can gain many of the reputational and financial benefits of CSR without addressing the underlying environmental risks.

Implications: More CSR ≠ better CSR

The findings highlight a challenge for policymakers and regulators. Broad demands for “more CSR” may not lead to safer or more sustainable business practices. Instead, they can encourage companies to focus on highly visible but less impactful actions.

To drive meaningful change, the research suggests that policies should focus on clear, measurable environmental outcomes rather than general CSR performance. Stronger oversight – from regulators, investors, and corporate governance – also plays a key role in pushing firms toward substantive improvements.

Not all CSR is equal. Looking beyond headline scores and commitments is essential to understand whether companies are reducing risk or simply improving their image.

Authors:

• Juan Manuel García Lara (Department of Business Administration, Universidad Carlos III de Madrid)
• Beatriz García Osma (Department of Business Administration, Universidad Carlos III de Madrid)
• Irina Gazizova (Department of Accounting, Stockholm School of Economics)
• Akram Khalilov (Department of Accounting and Operations Management, BI Norwegian Business School)