Corporate social responsibility and energy efficiency: Empirical evidence from the manufacturing sector of India

The strategic business firm manages today's profitability and tomorrow's sustainability to achieve a comparative advantage in the emerging market economy. Considering India's ambitious emission reduction target and rapid economic development, this study explores the potential relationship between corporate social responsibility (CSR) and the energy efficiency of manufacturing firms in India. Using firm‐level data, the panel fixed effects model shows that CSR negatively explains energy intensity (EI). We observed a consistent negative relationship between CSR and EI for all models, with and without controlled firm‐specific variables. Firms that manufacture chemical and chemical products, pharmaceuticals, medical chemicals and botanical products are energy intensive without CSR; however, CSR activities helped these firms become energy efficient. Our result confirms that voluntary CSR is less efficient than mandatory CSR in contributing to environmental and energy‐related indicators at the firm level. Our empirical results indicate several policy implications: (1) CSR should also focus on sustainable business models related to energy efficiency and reduction in carbon emissions; (2) firms should be encouraged to use CSR related to environmentally friendly innovations. We conclude that CSR spending and environmental expenses will increase energy efficiency at the firm level, which will help achieve net‐zero targets and sustainable industrial development.