Shaping CSR in Indonesia: The Role of Customer Concentration

Abstract

Corporate social responsibility (CSR) plays a pivotal role in shaping sustainable and responsible supply chain practices, yet evidence of its determinants in emerging markets remains limited. Prior studies of customer concentration (CC) provide mixed findings, and the role of digital communication in shaping CSR outcomes has not been systematically investigated. This study examines how CC influences CSR adoption and how CSR affects firm performance in Indonesia, with particular attention given to the amplifying role of social media. Building on stakeholder theory and signaling theory, we analyze panel data of 654 publicly listed firms between 2018 and 2020. The results show that CC promotes CSR engagement, with stronger effects among non-state-owned enterprises that operate under greater market pressures. CSR is positively associated with firm performance, and this relationship is reinforced when firms actively communicate CSR activities through social media, enhancing visibility and credibility. This study contributes to research on CSR and supply chains by demonstrating how digital platforms amplify customer-driven CSR and offering implications for firms in emerging economies.

1. Introduction

For years, global supply chains have been criticized for their connection to labor exploitation and unethical practices. This issue is especially prevalent in developing countries, where weak regulatory frameworks and intense competition can lead companies to prioritize cost savings over ethical considerations. Outsourcing may reduce financial burdens, but it often results in unsafe working conditions, excessive hours, and violations of workers’ rights that can escalate into reputational crises. Famous disputes have happened to big companies such as Nike’s subcontracting practices in Vietnam during the 1990s [1], and a case also occurred in PT Alpen Food Industry in Indonesia. Pregnant workers reportedly suffered miscarriages due to low-quality working conditions in those two companies [2]. These cases illustrate the enduring costs of neglecting social responsibility. Irresponsible actions can cause significant harm to individuals and society, while also putting companies at risk of brand damage, consumer boycotts, and serious financial risks in the long run. In this context, Corporate Social Responsibility (CSR) has become an important framework for aligning business operations with ethical, social, and environmental expectations. However, companies’ ability to adopt CSR is not a standalone effort; it is intertwined with global supply chains, where relationships with powerful buyers often determine the extent of responsible practice.

Building on this perspective, recent research on supply chain management has emphasized how buyer–supplier relationships influence the adoption and effectiveness of CSR. Peng et al. [3] emphasize that suppliers have the opportunity to strategically participate in CSR initiatives to strengthen their competitive edge, while also promoting greater CSR engagement from buyers. Their research indicates that proactive CSR strategies and their consistent application yield long-term benefits for suppliers. In a similar context, Lau et al. [4] illustrate that the implementation of ethical codes by either buyers or suppliers is positively correlated with their financial success. Furthermore, they highlight that the ethical codes established by buyers play a significant role in enhancing the financial performance of suppliers by mitigating ethical risks associated with suppliers, thus fostering a mutually advantageous relationship. These contributions highlight how governance mechanisms can encourage ethical behavior. However, most of this literature focuses on general sustainability performance or compliance-related risk management. On the other hand, there has been little focus on how the power of Customer Concentration (CC) influences supplier engagement in CSR. This gap is particularly salient in emerging markets, where institutional environments differ significantly from those of developed economies. This is becoming essential in today’s digital era, where social media amplifies stakeholders’ voices and magnifies the consequences of both compliance and non-compliance with CSR expectations.

Beyond supply chain studies, the broader CSR literature has largely examined outcomes such as corporate reputation [5], customer loyalty [6], corporate financialization [7], and financial performance [8]. While these contributions confirm the benefits of CSR engagement, the antecedents of CSR adoption remain underexplored. In this context, CC is highlighted as an important yet under-researched factor. Stakeholder theory indicates that businesses with a concentrated customer base experience greater pressure to engage in CSR to maintain their legitimacy and minimize reputational risks. According to Signaling theory, CSR initiatives and transparency act as reliable indicators of trust for major buyers, helping to lessen the risks tied to dependency. Together, these perspectives imply that higher CC strengthens firms’ incentives to engage in CSR as a strategic response to customer-driven pressures [9].

Recent developments reveal that CSR dynamics are no longer shaped solely by traditional buyer–supplier interactions. Social media has fundamentally altered how sustainability and CSR practices are disclosed, monitored, and interpreted. These platforms foster real-time and dialogic communication, enabling companies to engage directly with stakeholders and increase transparency in reporting [10]. Prior studies indicate that social media enhances stakeholder engagement [11] and amplifies the dissemination of CSR-related information, thereby heightening the visibility of both responsible and irresponsible practices. In this environment, social media not only amplifies the pressures that come with having a concentrated customer base, but it also highlights the importance of CSR initiatives. This makes the connection between CC and CSR especially relevant in modern markets. Although prior studies suggest that social media disclosure enhances corporate credibility [12] and fosters customer trust [13], research on how social media affects the connection between CC and CSR performance is still quite sparse, particularly in the context of emerging markets. To fill this gap, the present study examines how CC relates to CSR performance among publicly listed companies in Indonesia. It also investigates whether this relationship varies between state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). This distinction is critical because SOEs often operate in strategic sectors with political protection, which protects them from the usual market pressures. On the other hand, non-SOEs depend a lot more on customer trust and public opinion, making them more responsive to CSR demands. In addition, the analysis considers the moderating role of social media, recognizing that digital platforms intensify external monitoring while also reshaping how CSR initiatives are communicated and perceived.

The empirical focus is on the years 2018 to 2020, a particularly relevant period for two reasons. Before 2018, CSR disclosure in Indonesia was mainly voluntary disclosure, resulting in many firms providing only limited or inconsistent details. By 2018, reforms in regulations had established more rigorous CSR reporting standards, which not only improved accountability but also reshaped how disclosures were made. Moreover, this pre-pandemic window allows analysis of CSR activities under relatively stable institutional and market conditions without the extraordinary disruptions caused by COVID-19. In this context, this setting provides a valuable opportunity to investigate CSR dynamics in an emerging economy where ownership structures, stakeholder expectations, and regulatory reforms intersect in complex ways.

This study offers a number of valuable contributions. First, it broadens the scope of research on CC by shifting away from the usual emphasis on financial or operational results. Our research investigates how CC influences CSR performance, highlighting CC as a crucial yet often overlooked factor in fostering socially responsible practices. Second, it deepens theoretical understanding by integrating stakeholders and signaling theory to explain how customer pressures influence CSR strategies and how CSR disclosure signals corporate reliability to powerful buyers. Third, it presents new empirical findings from Indonesia, an emerging market characterized by institutional complexity, regulatory reforms, and unique ownership structures that lead to dynamics not often found in developed economies. Most importantly, this study introduces the novel role of social media as a moderating factor. By amplifying scrutiny, accelerating information dissemination, and heightening visibility, digital platforms reshape the intensity and effectiveness of customer pressure. Integrating social media into the CC-CSR framework advances the literature by demonstrating how digital communication environments transform stakeholder relationships. All these contributions deepen our understanding of what influences CSR. They provide both theoretical frameworks and practical insights into how businesses are navigating stakeholder expectations in a landscape that is increasingly transparent and interconnected through digital means.

The remainder of this paper is organized as follows. Section 2 reviews the literature and develops hypotheses. Section 3 outlines the methodology and dataset. Section 4 presents empirical findings, followed by a discussion of theoretical and practical implications in Section 5. Section 6 concludes with limitations and directions for future research.

2. Literature Review & Hypothesis Development

2.1. Customer Concentration

From the perspective of stakeholder theory and signaling theory, CC represents a crucial dimension of supply chain relationships that can both constrain and enable firms’ strategic behavior. CC refers to the extent to which a supplier’s revenue depends on a limited number of buyers [14]. A firm is considered highly concentrated when a single customer contributes a substantial portion of its total revenue, with a common benchmark being at least 10% of total sales. This threshold is also reflected in the International Financial Reporting Standards (IFRS 8.34) [15], which requires firms to disclose the proportion of revenue from such major customers and identify the relevant business segments. When it comes to CC, existing studies usually fall into two categories: those that focus on its potential upsides and those that emphasize the risks involved.

On the benefit side, experts believe that having a concentrated customer base can lead to better operational efficiency, spark innovation, and provide advantages in financial markets. By focusing on a small group of key customers, suppliers can streamline operations, reduce redundancies, and exploit economies of scale [16]. Patatoukas [17] finds that firms with more concentrated revenue streams tend to report lower selling, general, and administrative (SG&A) expenses, reflecting cost efficiencies. Furthermore, strong ties with a few strategic clients can provide more stable revenue streams that allow for greater commitment to research and development (R&D) [18,19], while also granting privileged access to customer-specific market insights that enhance innovation success [17]. Recent work further corroborates these advantages. Ye and Zhang [20] show that concentrated customer ties positively influence R&D investment in Chinese pharmaceutical firms. Kim and Luo [21] highlight the monitoring role of large customers in constraining earnings management. Do et al. [22] demonstrate that concentrated customer enhances stock market liquidity by signaling firm quality. Deng et al. [23] highlight that major customers can pressure suppliers to reduce carbon emissions. Further, Chen et al. [24] find that close ties deter supplier misconduct. From a signaling perspective, these studies show how having a concentrated customer base can signal reliability to the market and other stakeholders. At the same time, it boosts internal motivation for innovation, transparency, and sustainability.

Despite these advantages, CC is also a double-edged sword, as overdependence on a few buyers can heighten risks and power imbalances. Ni et al. [25] show that CC strengthens the bargaining power of major buyers, worsening suppliers’ financing constraints. Their machine-learning analysis further reveals that small non-SOEs are most vulnerable to these adverse effects. This dependence may pressure suppliers to adopt aggressive tax avoidance practices in response to financial stress [26], limit employment growth through increased financing constraints and profitability pressures [27] or undermine long-term value creation in mergers when acquirers target customer-concentrated firms [28]. Zhao and Su [29] also document that major customer’s financialization risk have contagion effects on suppliers. These risks reflect stakeholder conflicts in which suppliers, in prioritizing powerful customers, may compromise broader stakeholder obligations and jeopardize long-term legitimacy.

Overall, the literature paints a complex picture. CC can lead to greater efficiency, foster innovation, improve transparency, and contribute to sustainability. However, it also makes companies vulnerable to dependency issues, opportunistic actions, and the risk of diminishing value. More importantly, there is a limited understanding of how these dynamics influence CSR. From a stakeholder perspective, CSR can be a smart strategy to juggle the demands of major customers while also meeting the expectations of other stakeholders. Meanwhile, from a signaling perspective, CSR plays a crucial role in helping a company restore its credibility and legitimacy, particularly when its perceived independence is compromised by heavy customer dependence. This study, therefore, seeks to extend the literature by examining how CC shapes CSR performance, with a particular focus on the Indonesian context.

2.2. CSR Development & CSR Regulation in Indonesia

The development of CSR has undergone a long historical evolution. Bowen [30], often regarded as the father of modern CSR, emphasized the moral obligations of businessmen to pursue policies and decisions that align with societal objectives and values. Carroll [31] later refined this perspective by introducing the CSR pyramid, which conceptualizes corporate responsibility as consisting of economic, legal, ethical, and philanthropic dimensions. These foundational contributions positioned CSR not merely as philanthropy but as a multidimensional construct embedded within corporate strategy. Carroll [32] further emphasized that CSR requires firms to balance profitability with obligations to various stakeholders, making it a central component of sustainable business practices.

Scholars have used several theoretical perspectives to analyze CSR. Institutional Theory explains CSR as a response to coercive pressures from regulations, normative expectations from professional bodies, and mimetic pressures from external stakeholders [33,34,35]. Legitimacy Theory views CSR as a mechanism for firms to secure societal approval and maintain their reputation and license to operate [36,37]. While these perspectives are useful in explaining why CSR is practiced in different contexts, this paper adopts Stakeholder Theory and Signaling Theory as its primary frameworks. Stakeholder Theory emphasizes that firms must consider the needs of diverse stakeholder groups, including shareholders, employees, customers, governments, and communities [38]. This theory also highlights CSR as a tool to manage these relationships. On the other hand, Signaling Theory complements this by framing CSR disclosure as a strategic signal that reduces information asymmetry and communicates firm quality, credibility, and long-term orientation to external stakeholders such as investors and customers [39]. By integrating these two perspectives, this study specifically examines CSR as both a stakeholder-driven obligation and a signaling mechanism in customer–supplier relationships.

The evolution of CSR in Indonesia illustrates a unique regulatory path. The introduction of Law No. 40 of 2007 concerning Limited Liability Companies marked a pivotal moment by mandating CSR for companies involved in the exploitation of natural resources [40]. In contrast to developed nations where CSR has been a mandatory requirement across all industries for an extended period, Indonesia is currently in the process of shifting from a voluntary to a compulsory framework. According to this regulation, only industries related to natural resources are obligated to adopt CSR practices, while other sectors have the option to do so at their discretion. This regulatory framework underscores the importance of considering the perspectives of stakeholders, particularly local communities and government entities, and establishes CSR as a definitive indicator of a company’s commitment to and compliance with sustainable practices. Furthermore, the government has enhanced CSR obligations through additional policies and specific guidelines designed for different sectors, especially for state-owned enterprises, which are expected to prioritize not only profitability but also contribute to national development and social welfare, thereby increasing the necessity for CSR to be incorporated into corporate strategic planning.

Despite the existence of a legal framework, the implementation of CSR in Indonesia is still uneven. Some companies treat CSR as a compliance exercise designed merely to meet regulatory requirements [41], resulting in symbolic activities with limited social or environmental benefits. On the other hand, some firms choose to take a more impactful stance by aligning their CSR initiatives with their fundamental business practices and the needs of their stakeholders. For these firms, CSR becomes a way to strengthen legitimacy, enhance reputation, and build trust with customers and communities. In the Indonesian case, CSR therefore serves both as a stakeholder-oriented responsibility and as a signal to external parties of a company’s quality and commitment. This dual perspective underpins the theoretical foundation of the present study, which focuses on how CC shapes firms’ CSR initiatives within the Indonesian context.

2.3. Customer Concentration & CSR

Corporate customers significantly impact their suppliers’ actions, as they possess important financial and strategic interests that drive their influence. They closely monitor their partners’ financial condition, business development, and long-term viability, and in many cases, they can influence managerial decision-making [42]. For suppliers, CSR represents a strategic response to such pressures. In line with Stakeholder Theory, CSR initiatives allow firms to address the expectations of powerful stakeholders, particularly large customers, by building trust and loyalty [43]. Such efforts not only strengthen business relationships [44] but also enhance sales performance [45]. Moreover, firms with strong CSR engagement tend to pursue greater transparency, which reduces perceived risks among stakeholders. This transparency further decreases information asymmetry and contributes to lowering the cost of capital [46,47].

Big companies are stepping up their game by weaving sustainability into their business strategies and making sure these values reach all corners of their supply chains. Suppliers that demonstrate strong CSR performance are more likely to be selected as partners because they signal lower supply chain risks and higher reputational value [48,49]. According to Signaling Theory, CSR disclosure functions as a credible signal of firm quality and reliability, especially when customers cannot fully observe a supplier’s internal practices. By communicating ethical conduct, environmental stewardship, and community engagement, suppliers enhance their corporate reputation and signal a reduced likelihood of opportunistic behavior [44]. Therefore, CSR is now seen as a strategic approach that not only addresses stakeholder needs but also allows the firm to distinguish itself in the competitive landscape of customer–supplier relationship.

Despite these potential benefits, the literature also reveals a paradox. When CC is high, the bargaining power shifts heavily toward large customers, which may weaken the explanatory power of both Stakeholder Theory and Signaling Theory. From a stakeholder perspective, excessive dependence on a few clients may discourage suppliers from pursuing broad-based CSR initiatives, as their strategic focus narrows to satisfying only dominant customers. From a signaling perspective, powerful customers often obtain private information through direct interactions, reducing their reliance on CSR disclosures as signals of firm quality [50]. This dynamic suggests that the effectiveness of CSR as both a stakeholder-management tool and a signaling mechanism may be diminished under high CC. Empirical studies support this perspective, finding either weak or even negative associations between CC and CSR practices [51,52]. Wen et al. [51] argue that high CC is often accompanied by lower CSR transparency and limited awareness of CSR initiatives, further undermining its effectiveness.

The existing literature paints a picture where CC can impact CSR in various ways, both positively and negatively. On one hand, CSR helps suppliers fulfill stakeholders’ expectations and boosts their credibility with outside parties, which can really strengthen their relationships with customers. On the other hand, excessive dependence on a few powerful clients may weaken these effects by granting customers alternative means of acquiring information and exerting pressure that discourages broader CSR engagement. Based on these arguments, this study proposes two competing hypotheses:

H1a. 

Customer concentration positively affects CSR performance.

H1b. 

Customer concentration negatively affects CSR performance.

2.4. CSR in Customer-Centric Firms & Firm Performance

The findings regarding the connection between CSR and firm performance are not always straightforward, but most research suggests there is a positive link. CSR is becoming more recognized as a strategic management method that aligns social and environmental goals with essential business targets, ultimately providing both reputational and financial benefits. By engaging in CSR initiatives, firms can strengthen stakeholder trust, enhance customer loyalty [53,54], and mitigate risks linked to regulatory or social pressures [55,56], all of which contribute to improved profitability. Beyond these direct outcomes, CSR engagement can also facilitate access to external resources, such as investment capital [57] and strategic partnerships, since socially responsible firms are often perceived by investors and partners as more reliable and less risky. Furthermore, prior studies suggest that CSR contributes not only to long-term market valuation but also to short-term accounting-based outcomes by fostering efficiency [58], enhancing transparency [59], and encouraging innovation [60].

Empirical studies across different contexts provide further evidence. Singh and Chakraborty [61], examining Indian firms, reported that CSR disclosure is positively associated with accounting-based measures of performance, both in terms of quantity and quality. Similarly, Al-Shammari et al. [62] found that CSR is linked to stronger company performance, particularly among firms with robust research and development capacity and solid operational foundations. The study reveals a significant relationship between CSR, economic impact, and how a company is perceived. It implies that companies with a solid commitment to social and economic issues are more likely to achieve better financial performance.

Nevertheless, other studies have reported mixed or even negative associations [63]. Focusing on Indian firms, we observed that greater CSR disclosure was associated with lower profitability and market value, while the reverse effect of profitability on CSR reporting remained weak. Likewise, Yoon and Chung [64] found that internal CSR practices improved profitability but did not significantly affect market value. Despite these exceptions, the broader evidence base still leans toward a positive relationship. A comprehensive meta-analysis by Friede et al. [65], synthesizing more than 2000 studies, concluded that CSR engagement is generally associated with improved financial performance.

All these findings point to the idea that CSR can improve a company’s performance. However, the extent and nature of this relationship can shift depending on how we measure it and the context involved. Based on this literature, we propose the following hypothesis:

H2. 

CSR initiatives in customer concentration-based companies positively affect their firm performance.

2.5. Social Media Communication of CSR on Customer-Centric Firms & Firm Performance

The growing importance of social media in business communication extends well beyond its traditional role in marketing, as it increasingly supports visibility, coordination, and relationship building across organizational contexts. For instance, Bennett [66] shows that social media marketing enhances supply chain visibility and coordination by facilitating real-time information exchange, which allows firms to respond quickly to disruptions and strengthen collaboration with partners. Similarly, Sinha et al. [67] highlight that social media enables small and medium-sized enterprises (SMEs) to improve customer interaction, expand reach, and enhance competitiveness, particularly in highly dynamic markets. Both studies underscore the broader potential of social media as a strategic asset, not only for customer engagement but also for building trust and fostering organizational agility. Yet, while research has increasingly examined these broader applications, relatively fewer studies focus on the use of social media specifically for CSR communication. This leaves a significant gap in the existing literature.

Within this context, scholars have begun to explore how firms employ social media platforms to communicate CSR activities and engage stakeholders. Social media enables organizations to amplify CSR messages, increase transparency, and strengthen accountability by reaching large audiences at low cost and in real time. Yang and Basile [68] demonstrate that CSR communication through social media has a positive effect on firm performance, measured by Tobin’s Q, and further highlight the role of external stakeholder engagement in enhancing CSR outcomes. Dutot et al. [69] similarly find that CSR communication strategies can significantly improve a company’s online reputation, especially when combined with product quality or innovation, which ultimately contributes to stronger business performance. Schröter et al. [70], however, present a more nuanced perspective, noting that while CSR communication on Twitter does not always translate into improved corporate reputation, it nonetheless shows a positive correlation with firm performance. These findings indicate that the advantages of CSR communication through social media might not be direct. Instead, they seem to enhance company outcomes through factors such as visibility, credibility, and the trust of stakeholders.

Despite these insights, research on CSR communication through social media remains limited compared to broader CSR-performance studies, particularly in the context of CC. Existing studies rarely investigate how suppliers in highly concentrated customer relationships leverage social media to communicate CSR initiatives, reduce information asymmetry, and signal reliability to both dominant customers and external stakeholders. This omission is noteworthy given that social media offers a low-cost, highly visible channel for suppliers to manage dependence on a small number of powerful buyers. Addressing this gap, the present study examines the role of CSR communication through social media in shaping firm performance within customer-centric settings.

H3. 

CSR communication through social media in customer concentration-based companies affects firm performance.

As shown in Figure 1 below, the conceptual frameworks outline the hypothesis relationship examined in this study.

3. Research Methodology

3.1. Sample of Study

This study uses an unbalanced panel dataset that includes 654 publicly listed companies in Indonesia, tracked over a three-year span from 2018 to 2020. The study period was selected for several reasons. First, it coincides with the implementation of OJK (Financial Services Authority) Regulation Number 51/2017, which mandated sustainability reporting for financial institutions, issuers, and public companies, becoming fully effective in 2018. This regulatory shift provides a natural starting point for capturing the evolution of CSR practices in Indonesia. Second, this analysis covers a time before the COVID-19 pandemic, which caused major shifts in corporate strategies and disclosure methods. By selecting this timeframe, companies can be compared more easily, free from the noise created by the pandemic. Third, focusing on 2018–2020 provides a balanced view of post-regulation CSR dynamics while maintaining data reliability given the limitations of CSR reporting prior to 2018.

The initial sample included all firms listed on the Indonesia Stock Exchange (IDX). Then, purposive sampling criteria are applied: (i) firms must remain continuously listed during 2018–2020, (ii) complete annual reports and financial statements must be available, and (iii) firms must disclose sufficient information on CC and CSR activities. After applying these filters, the final dataset comprised 654 firms across twelve industries, classified under the Klasifikasi Baku Lapangan Usaha (KBLI). These industries include energy, consumer cyclicals, technology, basic materials, healthcare, industrials, financials, logistics, consumer non-cyclicals, property and real estate, and investment products.

It is important to note that, unlike some developed markets, Indonesia does not have a centralized database for firm-level financial and CSR-related data. The dataset we obtained was meticulously hand-collected. We pulled information from annual reports, sustainability reports, IDX filings, and the official websites of the companies. This labor-intensive process not only ensures accuracy and completeness but also highlights a key contextual challenge of conducting empirical research in emerging markets. By consolidating and standardizing these fragmented sources of information, this study contributes methodologically by providing a comprehensive and reliable dataset that can serve as a foundation for examining the relationship between CC and CSR in Indonesia.

3.2. Independent Variables

The primary independent variable in this study is CC. In line with prior studies [17,51,71,72], three distinct measures are employed to capture different dimensions of firms’ dependence on major customers. The first measure (CC1) is a binary indicator that equals one if a firm reports that its largest customer contributes more than 10 percent of total annual sales, and zero otherwise. This proxy captures whether a firm faces significant exposure to a single dominant customer and has been widely adopted in empirical studies examining customer–supplier relationships.

The second measure (CC2) adopts the Herfindahl–Hirschman Index (HHI_it), which reflects the overall distribution of sales across disclosed major customers. The index is calculated as follows:

$$\mathit{Customer} {\mathit{HHI}}_{\mathit{it}}={\sum }_{j=1}^j{\left({\displaystyle \frac{{Sales}_{ijt}}{{Sales}_{it}}}\right)}^2$$

Supplier i’s sales to major client j in year t are represented by Sales_ijt, and Supplier i’s overall sales are represented by Sales_it. The index ranges from zero to one, with higher values indicating greater concentration and, consequently, stronger dependence on a limited number of customers. This measure accounts for both the number of significant customers and their relative importance in the firm’s sales portfolio.

The third measure (CC3) is defined as the proportion of a firm’s annual total sales generated by all customers that individually account for at least 10 percent of revenues. This ratio provides an aggregate perspective on the extent of dependence on multiple large customers. While CC1 zeroes in on the reliance on just one key customer and CC2 illustrates the level of concentration, CC3 emphasizes the total exposure to several leading customers.

In addition to CC, we include a social media communication variable, SOCMED, to capture the visibility and stakeholder engagement of firms’ CSR efforts. SOCMED is measured as a binary variable equal to one if a firm actively promotes its CSR activities on at least one social media platform and zero otherwise. This simple measure reflects whether firms communicate their CSR practices publicly and allows stakeholders, including customers and investors, to monitor these activities. By including SOCMED, the study can explore how public visibility can affect the impact of CC on CSR practices.

By using these complementary measures, CC1, CC2, CC3, and SOCMED, the study enhances the validity and strength of the analysis. The combination of different measures of CC addresses potential concerns about alternative operational definitions. SOCMED provides a way to examine how stakeholder visibility and customer dependence work together to shape CSR behavior. These measures offer a detailed insight into how customer dependence and public engagement collectively impact CSR practices in Indonesia.

3.3. Dependent Variables

The dependent variable in this study is CSR performance (CSRP). To assess how companies and industries engage with CSR, this study utilizes the Global Reporting Initiative (GRI) framework. This framework has gained recognition as a global standard for CSR reporting. The GRI framework is particularly relevant in the Indonesian context, as it is frequently adopted by firms preparing sustainability reports in compliance with regulatory requirements and stakeholder expectations.

CSR performance is measured using a content analysis of firms’ annual and sustainability reports. Following the approach of Gamerschlag et al. [73], Chen et al. [74], and Sampong et al. [75], the analysis focuses on the social dimension of the GRI standards, which contains 32 disclosure items grouped into four categories. Each item is coded using a binary scoring system, where a score of one is assigned if the firm discloses the relevant information and zero if it does not. The CSR index for each firm-year observation is then calculated as the proportion of disclosed items relative to the total number of items, expressed as:

$$CSR=\sum _{j=1}{\displaystyle \frac{dj}{n}}$$

where

dj = 1 if item j is disclosed.

dj = 0 if item j is not disclosed.

n = Number of items.

To ensure the validity and reliability of the coding process, a coding framework was developed in line with GRI guidelines, and the coding was conducted manually by trained raters. Inter-rater reliability was assessed through cross-checking of a random sample of firm-year observations, and discrepancies were resolved through discussion to minimize subjectivity. This procedure ensures consistency in the evaluation of CSR disclosures across firms.

The choice of GRI-based disclosure as a measure of CSR performance is justified by its wide adoption in prior empirical studies, as well as its suitability for cross-industry comparisons. Furthermore, relying on disclosure-based measures reflects the fact that CSR in emerging markets such as Indonesia is often communicated through external reporting rather than internal performance indicators. While there are alternative options like ESG scores from commercial databases, these sources often fall short when it comes to covering Indonesian firms. Therefore, the GRI-based CSR index provides the most consistent and comprehensive measure available for the study period.

3.4. Control Variables

To minimize omitted variable bias and ensure that the estimated effect of CC on CSR reflects more than just firm-level heterogeneity, this study incorporates a set of control variables that have been consistently applied in prior literature on corporate governance and CSR. Firm size (SIZE) is an important factor to consider first since it is measured by taking the natural logarithm of total assets. This is because larger companies often draw more public attention and face closer scrutiny from stakeholders. As a result, they may feel pressured to share more information and invest more in CSR initiatives. Larger firms also have more financial and organizational capacity to support such activities, making size a well-established determinant of CSR performance. In addition, profitability is controlled for using both return on assets (ROA) and return on equity (ROE), since profitable firms not only possess the slack resources necessary to invest in discretionary projects such as CSR but may also use these initiatives as part of a broader reputation-building strategy to maintain legitimacy among their stakeholders.

Beyond size and profitability, capital structure is taken into account through financial leverage (LEV), defined as the ratio of total debt to total assets. The inclusion of leverage is important because highly leveraged firms are often constrained by creditor monitoring and limited financial flexibility, which may reduce their engagement in CSR. Conversely, firms with lower debt levels may have more discretion in channeling resources toward socially responsible practices. Growth opportunities and market valuation are captured using the market-to-book ratio (MTB) and Tobin’s Q. These indicators reflect how investors perceive the firm’s future prospects, and firms with stronger growth expectations may be under pressure to signal long-term sustainability through visible CSR commitments. By contrast, firms facing weaker growth opportunities may prioritize short-term financial performance at the expense of CSR investments.

There are other firm characteristics that matter as well. One of them is firm age (AGE), defined as the number of years since the company was incorporated. Older firms usually have a wealth of reputational capital and solid relationships with stakeholders, which can shape their CSR practices in a way that is different from younger firms that are still working on establishing their credibility. Board size (BOD), calculated as the number of directors serving on the board, is included as a governance-related control. A larger board can bring diverse perspectives and a broader understanding of stakeholder demands, potentially encouraging firms to engage in more extensive CSR activities. However, excessively large boards may suffer from coordination difficulties, which could damage their effectiveness in shaping CSR strategies.

The inclusion of these variables, SIZE, ROA, ROE, LEV, MTB, Tobin’s Q, AGE, and BOD, ensures that empirical analysis reflects the complex factors that work together to shape CSR performance. Their selection is consistent with prior empirical studies such as [42,51], which highlight the importance of firm-level and governance characteristics in explaining variations in CSR. By controlling for these variables, this study aims to provide a more robust and unbiased estimation of the relationship between CC and CSR.

3.5. Model Construction

To empirically examine the validity of our proposed hypotheses, this study introduces a research model that incorporates the key variables identified in our literature review. This model will be used to test Hypothesis 1, which examines the relationship between CC and CSR performance, Hypothesis 2, which explores whether CSR initiatives in CC-based companies positively affect their sales growth, and Hypothesis 3, which investigates whether CSR communication through social media in CC-based companies affects the firm’s performance. By analyzing the relationships between these variables within the framework of the proposed model, we aim to gain a deeper understanding of the complex dynamics at play and ultimately determine whether our hypotheses are supported by the data.

CSRP_it = α + β₁ CC_1-3 + β₂ SIZE_it + β₃ ROE_it + β₄ ROA_it + β₅ LEV_it + β₆ TOBINQ_it + β₇ AGE_it + β₈ BOD_it + β₉ MTB_it + €_it

(1)

SALES_it = α + β₁ CSRP_it + β₂ SIZE_it + β₃ ROE_it + β₄ ROA_it + β₅ LEV_it + β₆ TOBINQ_it + β₇ AGE_it + β₈ BOD_it + β₉ MTB_it + €_it

(2)

SALES_it = α + β₁ SOCMED_it + β₂ SIZE_it + β₃ ROE_it + β₄ ROA_it + β₅ LEV_it + β₆ TOBINQ_it + β₇ AGE_it + β₈ BOD_it + β₉ MTB_it + €_it

(3)

4. Findings & Discussion

4.1. Descriptive Statistics

Table 1. Descriptive Statistics of Customer Concentration & CSR Performance.

Variable	Mean	Min	Max	Std. Dev.	Obs
CSRP	3.185	0	7.368	2.086	1522
CC1	0.364	0	1	0.481	1522
CC2	0.059	0	1.306	0.181	1522
CC3	0.196	0	1	0.309	1522
SIZE	0.018	0	0.274	0.043	1522
ROA	2.376	−26.11	30.42	7.162	1522
ROE	2.912	−103.66	42.59	17.43	1522
LEV	23.6	0	86.2	20.442	1522
TOBINQ	5.038	0	221.983	27.048	1522
AGE	35.698	4	107	19.7	1522
BOD	4.742	2	11	1.958	1522
MTB	2.291	−0.9	28.7	3.896	1522

Note: CSRP = Corporate Social Responsibility; CC1 = Customer Concentration 1; CC2 = Customer Concentration 2; CC3 = Customer Concentration 3; SIZE = Firm Size; ROA = Return on Asset; ROE = Return on Equity; LEV = Leverage; TOBINQ = Firm Value; AGE = Firm Age; BOD = Size Board of Director; MTB = Market to Book Value.

provides a summary of the descriptive statistics pertaining to the variables utilized in this research study. The CSRP index exhibits a mean value of 3.185, with a range extending from 0 to 7.368 and a standard deviation of 2.086. This significant variation indicates that Indonesian publicly listed companies vary greatly in their levels of CSR disclosure. The fact that some companies do not report any CSR activities highlights a key issue: sustainability disclosure practices have not really caught on yet. This is surprising, especially since the Indonesian Financial Services Authority (OJK) has made it mandatory for listed companies to provide such reports since 2018. At the same time, a small number of firms achieve relatively high disclosure scores. This result indicates the variability in how Indonesian firms understand and implement regulatory requirements.

This variation reflects the institutional environment in Indonesia, where the regulatory framework for CSR has evolved through mandatory provisions such as Law No. 40/2007 on Limited Liability Companies and subsequent OJK regulations, but enforcement remains uneven. In developed markets, CSR reporting tends to be more uniform and is often supported by centralized databases. On the other hand, Indonesian companies still lean heavily on self-disclosure in their annual and sustainability reports. By constructing a CSR index from hand-collected reports, this study captures a more nuanced picture of CSR engagement than global databases typically provide, especially in underrepresented emerging markets. The descriptive evidence, therefore, highlights both the opportunities and challenges of examining CSR in Indonesia. The diverse levels of CSR performance suggest that market dynamics, such as the relationships with customers are important. This might impact how companies share their information, particularly when regulatory enforcement fails to ensure compliance. CC also exhibits meaningful variation across firms. The first proxy (CC1) shows that, on average, 36.4 percent of firms depend on at least one major customer accounting for more than 10 percent of sales, underscoring the significance of dominant buyers in shaping operational and strategic decisions. The Herfindahl–Hirschman Index (CC2) presents a relatively low mean of 0.059, but the maximum reaches 1.306, indicating that while many firms maintain diversified customer bases, a subset is highly concentrated and vulnerable to buyer power. Similarly, CC3 reveals that, on average, 19.6 percent of sales are derived from large customers, with some firms relying entirely on a small number of buyers.

These patterns reflect the dual nature of CC in Indonesia’s emerging market context. For some companies, dependence on large customers provides stable revenues and long-term contracts; for others, it creates vulnerability to bargaining power imbalances. In such an environment, CSR may function as a strategic response, enabling firms to strengthen ties with key customers, signal reliability, and align with buyer expectations regarding sustainability. On the other hand, companies with a more varied customer base might adopt CSR strategies to reach out to a broader set of stakeholders. This descriptive analysis ultimately provides a basis for examining whether CC serves as an external governance mechanism that shapes CSR participation in Indonesia. Supporting the descriptive statistics above,

Table 2. Correlation Matrix for Customer Concentration & CSR Performance.

	CSRP	CC1	CC2	CC3	SIZE	ROA	ROE	LEV	TOBINQ	AGE	BOD	MTB
CSRP	1.000
CC1	0.233 ***	1.000
	(0.000)
CC2	0.191 ***	0.432 ***	1.000
	(0.000)	(0.000)
CC3	0.239 ***	0.835 ***	0.432 ***	1.000
	(0.000)	(0.000)	(0.000)
SIZE	0.068 ***	−0.153 ***	0.049 *	−0.133 ***	1.000
	(0.008)	(0.000)	(0.056)	(0.000)
ROA	0.048 *	0.033	0.074 ***	0.002	0.011	1.000
	(0.061)	(0.202)	(0.004)	(0.994)	(0.655)
ROE	0.014	0.015	0.085 ***	−0.018	0.100 ***	0.821 ***	1.000
	(0.594)	(0.561)	(0.001)	(0.487)	(0.000)	(0.000)
LEV	0.096 ***	0.118 ***	0.129 ***	0.121 ***	−0.064 **	−0.249 ***	−0.261 ***	1.000
	(0.000)	(0.000)	(0.000)	(0.000)	(0.013)	(0.000)	(0.000)
TOBINQ	−0.004	0.093 ***	−0.041	0.118 ***	−0.069 ***	−0.035	−0.062 **	−0.018	1.000
	(0.885)	(0.000)	(0.106)	(0.000)	(0.007)	(0.168)	(0.016)	(0.479)
AGE	0.044 *	−0.086 ***	0.089 ***	−0.104 ***	0.305 ***	0.061 **	0.053 **	−0.080 ***	−0.036	1.000
	(0.089)	(0.001)	(0.000)	(0.000)	(0.000)	(0.017)	(0.038)	(0.002)	(0.158)
BOD	0.068 ***	−0.100 ***	0.128 ***	−0.090 ***	0.475 ***	0.117 ***	0.132 ***	−0.053 **	−0.088 ***	0.297 ***	1.000
	(0.008)	(0.000)	(0.000)	(0.000)	(0.000)	(0.000)	(0.000)	(0.038)	(0.001)	(0.000)
MTB	−0.010	−0.004	0.005	0.021	−0.032	0.145 ***	0.048 *	0.001	0.012	−0.011	−0.044 *	1.000
	(0.707)	(0.881)	(0.844)	(0.419)	(0.214)	(0.000)	(0.062)	(0.978)	(0.633)	(0.670)	(0.088)

Note: p-value in parentheses; * p < 0.1, ** p < 0.05, *** p < 0.01; CSRP = Corporate Social Responsibility; CC1 = Customer Concentration 1; CC2 = Customer Concentration 2; CC3 = Customer Concentration 3; SIZE = Firm Size; ROA = Return on Asset; ROE = Return on Equity; LEV = Leverage; TOBINQ = Firm Value; AGE = Firm Age; BOD = Size Board of Director; MTB = Market to Book Value.

below presenting the correlation matrix between CC and CSR.

4.2. Empirical Result of Hypothesis 1

Table 3. Customer Concentration & CSR Performance.

		(1) CSRP
CC1	0.3613 ***
	(0.0871)
CC2		0.4677 **
		(0.2292)
CC3			0.3965 ***
			(0.1403)
SIZE	1.0193	0.9065	0.947
	(1.0913)	(1.0961)	(1.0946)
ROA	0.0223 **	0.022 **	0.0226 **
	(0.0097)	(0.0097)	(0.0097)
ROE	−0.009 **	−0.0089 **	−0.0086 **
	(0.004)	(0.004)	(0.004)
LEV	0.0016	0.0018	0.002
	(0.0021)	(0.0021)	(0.0021)
TOBINQ	−0.0012	−0.0007	−0.0012
	(0.0013)	(0.0013)	(0.0014)
AGE	−0.0022	−0.0031	−0.0022
	(0.0022)	(0.0022)	(0.0022)
BOD	0.0283	0.0171	0.0256
	(0.0228)	(0.023)	(0.0229)
MTB	0.0133	0.0124	0.0127
	(0.0095)	(0.0095)	(0.0095)
_cons	6.8928 ***	7.2129 ***	7.0979 ***
	(0.8058)	(0.8065)	(0.8059)
Year FE	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes
Adjusted R-square	0.5701	0.5663	0.5674
Prob > F	0.000	0.000	0.000
Obs	1522	1522	1522

Note: Standard errors in parentheses; ** p < 0.05, *** p < 0.01; CSRP = Corporate Social Responsibility; CC1 = Customer Concentration 1; CC2 = Customer Concentration 2; CC3 = Customer Concentration 3; SIZE = Firm Size; ROA = Return on Asset; ROE = Return on Equity; LEV = Leverage; TOBINQ = Firm Value; AGE = Firm Age; BOD = Size Board of Director; MTB = Market to Book Value.

presents the regression results examining the effect of CC on CSR performance. Across all three specifications, the coefficients on CC are positive and statistically significant, lending strong support to Hypothesis 1. When measured using a binary indicator for the presence of a major customer (CC1), the coefficient of 0.3613 (p < 0.01) indicates that firms that depend on at least one customer contributing more than 10 percent of sales are more likely to disclose CSR activities compared to firms without such reliance. The relationship also holds when alternative measures are applied. The Herfindahl-Hirschman Index (CC2) is positively associated with CSR performance, with a coefficient of 0.4677 (p < 0.05), suggesting that firms with more concentrated sales among fewer customers are more engaged in CSR disclosure. Similarly, the proportion of sales to large customers (CC3) is positively significant at the 1 percent level, with a coefficient of 0.3965. These results demonstrate that the positive link between CC and CSR performance is robust across different measurement approaches, addressing reviewer concerns about measurement sensitivity.

Placing these findings within the Indonesian context adds further insight. Indonesia’s regulatory framework for CSR has been formalized through instruments such as Law No. 40/2007 on Limited Liability Companies and subsequent Financial Services Authority (OJK) regulations, which mandate sustainability reporting for listed companies. Despite the potential for improvement, enforcement still varies widely, and many companies only share the bare minimum when it comes to information. This is evident in the statistics, which show that several firms have zero CSR disclosure. In this setting, powerful customers emerge as an important external governance mechanism. Large buyers, particularly multinational corporations or state-owned enterprises that often operate under greater scrutiny, are likely to impose sustainability expectations on their suppliers. As a result, firms with concentrated customer bases may adopt CSR not merely for regulatory compliance but as a strategic response to safeguard long-term commercial relationships and align with buyer requirements. Conversely, firms with more dispersed customer bases may face weaker external pressure, leaving them less motivated to invest in CSR. By showing that CC is positively associated with CSR performance even after controlling for year and industry fixed effects, this study highlights the substitutive role of market-based forces in an emerging economy where formal institutions are still developing. In Indonesia, the regulatory enforcement of CSR disclosure can be quite inconsistent, leading customers to act as informal monitors. Their influence encourages companies to enhance their transparency and social responsibility efforts. This situation illustrates a broader theoretical point: stakeholder pressure can either support or replace weak institutional enforcement, especially in emerging market settings.

In Indonesia, the positive link between CC and CSR contrasts sharply with the evidence from many developed nations, where CC is often negatively correlated with CSR [51,52,76]. In mature markets, companies with a concentrated customer base may face significant bargaining power from dominant buyers, which can lead to increased cost pressures and a reduction in discretionary spending on CSR initiatives. In these contexts, CSR is frequently seen as an optional or reputational activity rather than a strategic necessity dictated by customers. However, in Indonesia, the combination of emerging regulatory frameworks and inconsistent enforcement creates a different dynamic. Concentrated customers, especially multinational firms or state-owned enterprises, act as powerful informal governance agents, actively encouraging suppliers to engage in CSR practices. Consequently, Indonesian firms respond to customer concentration with increased CSR involvement, not only for compliance but also to maintain strategic relationships and secure future business opportunities. This illustrates the context-dependent nature of the CC-CSR relationship and highlights the importance of market-based pressures in addressing institutional weaknesses in emerging economies.

While Table 3 establishes the overall positive effect of CC on CSR performance, it is equally important to consider whether this relationship varies across ownership structures. In Indonesia, SOEs and non-SOEs operate under distinct institutional logics, with SOEs embedded in politically anchored frameworks and non-SOEs driven more by market pressures.

Table 4. CC & CSR Performance in SOEs & Non-SOEs Companies.

	(1) CSRP NPR I			(2) CSRP NPR II
CC1	0.5735			0.3068 ***
	(0.5681)			(0.0899)
CC2		0.0519			0.5977 **
		(0.8752)			(0.2627)
CC3			0.9738			0.3608 **
			(0.8437)			(0.1448)
SIZE	6.7319	10.0436 **	8.8184 *	0.6109	0.4495	0.4895
	(5.0341)	(4.4907)	(4.5731)	(1.2796)	(1.282)	(1.2815)
ROA	−0.0777	−0.0778	−0.087	0.0246 **	0.0246 **	0.0249 **
	(0.0686)	(0.0852)	(0.0847)	(0.0097)	(0.0098)	(0.0098)
ROE	0.0051	0.0033	0.0105	−0.0091 **	−0.0091 **	−0.0088 **
	(0.0231)	(0.0279)	(0.0282)	(0.004)	(0.0041)	(0.004)
LEV	−0.0343 **	−0.0473 ***	−0.0418 **	0.0018	0.002	0.0022
	(0.0172)	(0.0167)	(0.0171)	(0.0022)	(0.0022)	(0.0022)
TOBINQ	0.2379	0.5208	0.4678	−0.0012	−0.0007	−0.0012
	(0.3677)	(0.4058)	(0.4015)	(0.0013)	(0.0013)	(0.0013)
AGE	−0.0135	−0.0147 *	−0.0125	−0.0021	−0.0027	−0.0023
	(0.0134)	(0.0083)	(0.0085)	(0.0024)	(0.0025)	(0.0025)
BOD	−0.0136	−0.1005	−0.0575	0.0181	0.0059	0.0166
	(0.1793)	(0.1286)	(0.1327)	(0.0236)	(0.0239)	(0.0236)
MTB	−0.1147	−0.1864	−0.1339	0.0129	0.012	0.0125
	(0.1674)	(0.1934)	(0.1968)	(0.0094)	(0.0095)	(0.0095)
_cons	5.0281 **	5.8738 ***	4.8642 **	6.9574 ***	7.2312 ***	7.1298 ***
	(2.3034)	(2.1119)	(2.0286)	(0.8023)	(0.8009)	(0.8011)
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes
Adjusted R-squared	0.7446	0.6319	0.6389	0.5732	0.5712	0.5715
Prob > F	0.000	0.000	0.000	0.000	0.000	0.000
Obs	96	96	96	1426	1426	1426

Note: Standard errors in parentheses; * p < 0.1, ** p < 0.05, *** p < 0.01; CSRP NPR I = Corporate Social Responsibility in the State-Owned Enterprises; NPR II = Corporate Social Responsibility in Non-State-Owned Enterprises; CC1 = Customer Concentration 1; CC2 = Customer Concentration 2; CC3 = Customer Concentration 3; SIZE = Firm Size; ROA = Return on Asset; ROE = Return on Equity; LEV = Leverage; TOBINQ = Firm Value; AGE = Firm Age; BOD = Size Board of Director; MTB = Market to Book Value.

, therefore, examines whether ownership moderates the influence of CC on CSR outcomes. The results reveal clear differences between SOEs and non-SOEs. For SOEs, the coefficients of CC measures (CC1, CC2, and CC3) are statistically insignificant, suggesting that CC does not meaningfully shape CSR outcomes. In contrast, for non-SOEs, CC consistently shows positive and significant effects on CSR performance, indicating that customer dependence is an important determinant of CSR engagement in privately owned firms.

The weaker association in SOEs can be explained by the institutional environment in Indonesia. SOEs are subject to strong government influence and operate under extensive political and regulatory oversight. Their CSR practices are largely shaped by state priorities and national development objectives such as infrastructure, community empowerment, and environmental sustainability. Law No. 40/2007 formalizes CSR obligations, making CSR engagement for SOEs more of a regulatory compliance matter rather than a market-driven initiative. As a result, CC does not exert a significant influence on CSR practices because its legitimacy and social responsibilities are already safeguarded by mandatory state requirements and political mandates. Non-state-owned companies operate in a completely different world from their government-backed competitors. These businesses fight for their lives in cutthroat markets where losing a major customer can spell disaster. When companies start relying too much on just a few major clients, they are really taking a risk. One misstep could cost them everything. That is why these businesses take CSR seriously, as if their very survival depends on it. They implement social responsibility initiatives to demonstrate that they are trustworthy partners and maintain a steady stream of profitable contracts.

In Indonesia, many companies have integrated into global supply chains and found that international buyers are often unwilling to engage unless they can demonstrate their CSR credentials. The findings of this research reveal that state-owned companies follow the political rhythm, with their CSR programs mirroring the government’s wishes. They often ignore what customers actually want or what the market demands. Meanwhile, non-state companies dance to an entirely different rhythm, driven by market pressures and customer demands that can change overnight. This division reveals something quite significant: the same business challenges can lead to entirely different outcomes based on whether firms are accountable to politicians or to paying customers.

4.3. Empirical Result of Hypothesis 2

The data shown in

Table 5. CSRP in Customer Centric Companies & Firm Performance.

	(1)
	SALES
CSRP	0.0634 ***
	(0.0216)
SIZE	24.2712 ***
	(0.9072)
ROA	0.0116
	(0.008)
ROE	0.0053
	(0.0033)
LEV	0.0004
	(0.0018)
TOBINQ	−0.0001
	(0.0011)
AGE	0.0072 ***
	(0.0018)
BOD	0.085 ***
	(0.0189)
MTB	0.0246 ***
	(0.0079)
_cons	−1.1975 *
	(0.6851)
Year FE	Yes
Industry FE	Yes
Adjusted R-square	0.5300
Prob > F	0.000
Obs	1522

Note: Standard errors in parentheses; * p < 0.1, *** p < 0.01; SALES = Firm Sales in t year; CSRP = Corporate Social Responsibility; SIZE = Firm Size; ROA = Return on Asset; ROE = Return on Equity; LEV = Leverage; TOBINQ = Firm Value; AGE = Firm Age; BOD = Size Board of Director; MTB = Market to Book Value.

below clearly demonstrates the positive influence of CSR in customer-centric firms on sales performance, supporting studies from Salam et al. [77] and Jia et al. [45]. Companies that implement strong CSR initiatives consistently outperform their rivals (coefficient of 0.0634, significant at p < 0.01). This result is not merely about positive corporate narratives or fulfilling regulatory requirements. It is fundamentally about substantial profits and a legitimate competitive advantage. When businesses invest in impactful CSR initiatives, they foster customer trust and build a corporate reputation that directly results in increased sales. Furthermore, since it has been proven that customer expectations drive CSR engagement, these findings confirm the cyclical nature of the process. Customer expectations lead to enhanced CSR, which subsequently results in improved sales performance.

In Indonesia’s rapidly evolving marketplace, CSR’s sales impact hits differently than anywhere else. Indonesian consumers have become incredibly savvy about corporate behavior. They care deeply about environmental protection, halal standards, and how companies engage with their communities. When businesses actively showcase their CSR efforts, they are not just marketing themselves. They are earning trust and proving they are the kind of company people want to support. This relationship becomes make-or-break in industries like consumer goods, food, and retail, where your brand reputation can determine whether customers choose you or your competitor. On top of that, Indonesian companies aiming for international sales have discovered that foreign buyers now view CSR compliance as a basic necessity. Without those CSR credentials, there is no business relationship to be had. This means these programs are essential for accessing new markets and building enduring customer loyalty.

The research also uncovers some fascinating patterns about what actually drives sales success. Naturally, larger and more established companies tend to perform better. They have the advantage of name recognition and a solid track record built over the years. Companies with strong leadership teams and positive market buzz also see their sales benefit, proving that good governance and reputation matter enormously. Surprisingly, traditional financial metrics such as profitability ratios, debt levels, and stock valuations do not automatically lead to higher sales. These findings demolish the old myth that CSR is just about responding to outside pressure. The evidence clearly indicates that CSR serves as a powerful strategic tool for enhancing business performance. It is not only a defensive measure, but also an offensive strategy. In the Indonesian market, where both consumer expectations and global sustainability standards are gaining importance, CSR disclosure emerges as a credible pathway for firms to enhance legitimacy, cultivate consumer trust, and achieve sustainable sales growth.

4.4. Empirical Result of Hypothesis 3

Table 6. CSR Communication through Social Media and Sales.

	(1)
	SALES
SOCMED	0.2563 ***
	(0.0199)
SIZE	19.0611 ***
	(0.9539)
ROA	0.0141 *
	(0.0076)
ROE	0.0032
	(0.0032)
LEV	0.0008
	(0.0017)
TOBINQ	−0.0004
	(0.0011)
AGE	0.0055 ***
	(0.0017)
BOD	0.0661***
	(0.0181)
MTB	0.0234 ***
	(0.0075)
_cons	−0.5302
	(0.6344)
Year FE	Yes
Industry FE	Yes
Adjusted R-square	0.5755
Prob > F	0.000
Obs	1522

Note: Standard errors in parentheses; * p < 0.1, *** p < 0.01; SALES = Firm Sales in t year; SOCMED = Social-Media Engagement; SIZE = Firm Size; ROA = Return on Asset; ROE = Return on Equity; LEV = Leverage; TOBINQ = Firm Value; AGE = Firm Age; BOD = Size Board of Director; MTB = Market to Book Value.

reports the regression results testing Hypothesis 3, which posits that CSR communication through social media enhances firm sales. The coefficient on social media engagement (SOCMED) is positive and highly significant at the 1 percent level (0.2563, p < 0.01), indicating that firms that actively communicate CSR initiatives through social media platforms experience higher sales performance. This suggests that the visibility of CSR efforts plays an important role in converting sustainability activities into measurable market outcomes. Unlike traditional CSR disclosures that are often buried in annual or sustainability reports, social media provides a direct and interactive channel through which firms can signal their values, gain legitimacy, and influence consumer perceptions.

Taken together with the results of Hypothesis 2, which showed that CSR engagement alone already contributes positively to sales, these findings highlight the amplifying role of communication. This partnership between substance and communication becomes absolutely critical in competitive industries.

Indonesia’s digital landscape creates the perfect storm for CSR communication success. This country boasts one of the world’s most connected populations, with social media usage rates that would make Silicon Valley jealous. Platforms like Instagram, TikTok, and Facebook have become powerful business communication tools. Smart companies use these platforms to tell compelling stories about their CSR work, reaching millions of potential customers and building the kind of emotional connections that drive purchase decisions. This is particularly revolutionary for consumer brands in food, retail, and e-commerce. A single viral CSR campaign can completely change how the public views a brand and significantly increase sales. Those companies that excel at digital storytelling can express their values and manage to turn social awareness into real revenue. The findings indicate that factors like firm size, profitability, age, board size, and market-to-book ratio all positively impact sales performance. This indicates that larger, more profitable, well-governed, and established companies are in better positions to benefit from CSR communication. However, the strong coefficient on social media demonstrates that effective CSR communication works independently of these company characteristics. Companies do not need to be large or highly profitable to see sales benefits from communicating their CSR efforts well through social media channels.

The findings confirm Hypothesis 3 by showing that CSR initiatives generate more commercial value when companies communicate them effectively through social media platforms. In Indonesia’s digitally connected environment, consumer trust and purchasing decisions are increasingly shaped by online content. CSR communication through social media has become a vital tool for companies that want to turn their social responsibility efforts into concrete market advantages and increased sales.

5. Discussion

The study provides clear evidence about how CC, CSR, and CSR communication through social media work together to affect company performance in Indonesia. Following stakeholder theory and signaling theory, companies with concentrated customer bases engage in more CSR activities. Large customers, particularly multinational corporations and state-owned enterprises, act as influential stakeholders who expect ethical practices and sustainability from their suppliers. In Indonesia, where CSR disclosure enforcement remains inconsistent despite existing laws, CC serves as an external pressure that motivates companies to demonstrate responsible business practices. Companies with highly concentrated customers use CSR strategically to signal their reliability and alignment with buyer expectations, while companies with many smaller customers face less external pressure. This shows how market forces can substitute for weak institutional enforcement.

The type of company ownership makes a big difference in how customer relationships influence CSR decisions. State-owned companies work under direct government supervision and focus on broader goals like helping the country develop, protecting the environment, and supporting local communities. When it comes to CSR, these companies usually stick to a standard approach since they are bound by government regulations and societal norms. In contrast, private companies find themselves in a much tougher spot. They are constantly striving to stay afloat in competitive markets, where pleasing their biggest customers is essential. When private companies depend heavily on a few large buyers, they feel pressure to adopt CSR programs to prove they are trustworthy partners and to keep those important contracts coming. This shows that the same pressure works very differently depending on whether the government or private investors own the company.

The study proves that companies undertaking CSR work actually sell more products and services. When companies become involved in social responsibility programs, they build better reputations, earn more trust from consumers, and become more respected in their industries. This reinforces the idea that CSR serves as a signal, suggesting to consumers, “we are a reputable company to do business with.” The results are consistent with earlier studies and reveal that Indonesian consumers are becoming more aware of ethical business practices. They prefer products that are sustainable and comply with religious guidelines, and companies involved in global supply chains are seeing even higher returns on their CSR investments. Talking about CSR on social media makes a huge difference in how much it helps sales. Companies that actively share their CSR work on Instagram, TikTok, and Facebook see much better sales results than those that just do CSR quietly. This shows how important it is for companies to make their good work visible and engage with people online. Social media lets companies tell their CSR story directly to consumers, have conversations with them, and build a better brand image. When companies combine doing good work with talking about it effectively online, they create a powerful effect that turns social responsibility into real money in the bank. This is especially important in places like Indonesia, where everyone is connected online and companies can reach consumers directly through these platforms.

These findings provide valuable new insights into current business theories by illustrating how customer demand and social media exposure can effectively help companies prove their legitimacy, particularly in contexts where government regulations are either weak or inconsistent. The study builds on our existing knowledge by demonstrating that the effectiveness of these signals is influenced by the ownership of the company and the characteristics of the local business environment. This insight helps us understand why companies engage in CSR and what outcomes they can anticipate, especially in developing countries like Indonesia.

6. Conclusion, Research Limitation, and Future Research Direction

This research focused on how a small number of large customers can shape a company’s commitment to CSR, including the way they communicate about it on social media, and their overall performance in Indonesia. Additionally, we investigated how different ownership types affect these relationships. The results show that having concentrated customers pushes companies toward more CSR activities, especially private companies. When companies do CSR well, they sell more, and this effect gets even stronger when they share their CSR work on social media. These findings support the theory that CSR works as a way for companies to signal to customers, consumers, and other stakeholders that they are reliable, ethical, and committed to doing the right thing. Overall, CSR functions in two main ways. First, it allows companies to meet the expectations of their larger customer base. Second, it enhances their market performance, with social media intensifying both of these impacts.

This study contributes by extending signaling theory to the context of emerging markets, demonstrating how CC acts as an external signal that drives CSR adoption, particularly where regulatory enforcement is uneven. It also highlights the moderating role of ownership structure, showing that institutional embeddedness shapes firms’ CSR responses to customer pressures. Moreover, the study emphasizes the importance of CSR communication via social media, revealing that visibility and stakeholder engagement amplify the effectiveness of CSR initiatives and the market benefits they generate. Practically, these findings suggest that managers should view CSR not only as a compliance tool but also as a strategic signal. Firms can leverage social media to communicate their CSR activities, strengthen relationships with key customers, enhance legitimacy, and support sales growth. Non-state-owned enterprises, in particular, may benefit from aligning CSR strategies closely with customer expectations to achieve competitive advantages.

Several limitations need to be acknowledged. The focus of this study is strictly based on publicly listed Indonesian firms, which might limit how well the findings can be applied to private or smaller businesses that experience different stakeholder challenges. Hand-collected CSR data from annual and sustainability reports may be incomplete or inconsistently reported, introducing potential measurement bias. Using CSR indices and social media engagement as proxies may not fully capture the quality or impact of initiatives. Finally, the panel design cannot fully establish causality, and reverse causality between CSR and firm performance cannot be entirely ruled out.

To overcome these limitations, future research could focus on CSR dynamics in small and medium-sized businesses or explore multiple emerging markets to validate the findings. Implementing longitudinal or experimental designs could provide a clearer picture of causal relationships and shed light on how customer pressures impact CSR adoption. Further studies could also investigate alternative communication channels, such as corporate websites or traditional media, to determine whether the signaling effect of CSR is consistent across platforms. Finally, research can examine interactions between regulatory enforcement, customer expectations, and digital communication to provide a more comprehensive understanding of CSR as a strategic signal in emerging markets.