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

Sipilä, J., Alavi, S.,Edinger-Schons, L.M., Dörfer, S. & Schmitz, C.

Synopsis: Recent marketing research has identified mixed effects of luxury companies’ corporate social responsibility (CSR) engagement on customer behavior. Therefore, this article aims to develop an improved understanding of CSR in the luxury context. We propose that, unless carefully implemented, CSR engagement leads to lower financial performance and decreased customer loyalty for luxury companies, because customers tend to think that luxury companies merely engage in CSR for egoistic reasons, such as gaining a competitive advantage. This is particularly the case 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) focusing their CSR efforts on employee wellbeing instead of philanthropic donations, 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.