Leveraging artificial intelligence to assess the impact of digital CSR communications on financial performance

Abstract

Corporate social responsibility (CSR) has become more important, impacting how companies interact with stakeholders and manage their social and environmental responsibilities. Digital platforms, such as websites, social media, and other online tools, play a crucial role in communicating CSR initiatives, a practice known as digital CSR communication. The study investigates the effect of digital CSR communication on financial performance by using artificial intelligence and proposes a new architecture called the Refined Recurrent Neural Network (RRNN). The study then applies data preprocessing and natural language processing (NLP) techniques like tokenization and sentiment analysis to capture the essence of CSR-related posts on social media. A sample of 120 manufacturing companies is evaluated to measure the time-lag effect of digital CSR activities on two financial indicators: revenue growth, profitability and the volume of CSR communication along with stakeholder interaction. Results point to a beneficial effect of digital CSR communication on financial performance with stakeholder interaction as a significant mediating factor. Nonetheless, the research also demonstrates that the returns from communicating digital CSR are not very significant for companies that are highly rated for their CSR; thus, for very high levels of CSR performance, the returns from communicating it digitally tend to decrease reduce. It further emphasizes the strategic importance of AI-driven analyses to identify how the process of digital CSR communication can facilitate monetary performance and improve stakeholder engagement. This goal however, apart from being an agile asset to streamline CSR strategies, monitoring stakeholder response, and maximizing financial returns through the proposed RRNN model, contributes to sustainable business growth in the digital age.