A fuzzy logic expert system for the measurement of Corporate Social Responsibility identity

Purpose - The aim of this study is to propose a method to measure the Corporate Social Responsibility (CSR) identity (Otubanjo, 2013) of a firm. Using this method, based on a fuzzy logic expert system, it is possible to generate a comprehensive rating for the assessment of the sustainability of a firm. In fact, to ensure that a firm is CSR-compliant, it is important to express CSR principles in terms of measurable variables. Up to now, measurement has been hampered by a lack of clarity in theoretical frameworks and empirical methods for the CSR construct. Design/methodology/approach- The analysis model is formalized through an FES (fuzzy expert system). The algorithm of the FES aggregates multicriteria evaluations of a problem. The assessments of behaviour and the resulting decisions are represented in blocks of rules, drawn up by an inference engine in fuzzy logic. The FES unites the ability of an expert system to simulate the decision-making process with the uncertainty typical of human reasoning, which is present in fuzzy logic. The main structure of the model is based on the aggregation of three components: human capital (HumanCap), strategy (Strategy) and reporting (ESGrep: Environmental, Social and Governance reporting). Originality/value - Despite the spread of CSR practices among firms, there is not a commonly accepted method of measuring sustainability. Moreover, although Environmental social governance (ESG) rating agencies provide CSR ratings, their methodologies have certain weaknesses. Considering the growing importance of socially responsible financial markets, this topic may prove to be of vital importance, above all for decision-makers in the management of their investments, by remedying the deficiencies in methodologies used by sustainability rating organizations. We also think that fuzzy logic methodology is an appropriate way of assessing sustainability because of the "fuzzy" nature of sustainability. Practical implications - The outcome of the application is a system designed to measure the CSR identity of a firm. On the management side, the possibility to identify the determinants of the different CSR intermediate indicators making up the final CSR index would allow CSR-compliant managers to use this information for decision-making purposes.