CSR has evolved and become a strategy for sustainability (Huang et al. 2022; Sánchez-Teba et al. 2021; Strand et al. 2015; Wu and Jin 2022), including in developing countries (Dobers and Halme 2009; Sorour et al. 2020; Stanislavská et al. 2020). CSR as a way of reducing carbon emissions (Ali et al. 2020) faces social challenges (Grabner-Kräuter et al. 2023).

However, Mostepaniuk et al. (2022) stated a straightforward implementation of the CSR framework. Barbu et al. (2022) demonstrated the framework in sports institutions; Siddique et al. (2023) demonstrated it in the banking industry. CSR needs to be better planned, according to Shayan et al. (2022), and CSR reporting systems need to be more robust (Jahid et al. 2023). CSR is a complex process (Khojastehpour and Jamali 2020). The failure of rearview and practice standards is tricky, and low continuity and dedicated efforts cause CSR to be not optimal (Ali et al. 2020). Several problems in the implementation of CSR in developing countries hinder the functionalization of CSR (Gulema and Roba 2021; Ullah and Sun 2021). In addition to a vague understanding of CSR, different views of and interests in CSR still widely exist in developing countries (Yunis et al. 2018). The legal framework of CSR still needs to be improved (Lauwo et al. 2016) whereas, at the international level, companies still need formal responsibilities related to CSR (Buhmann 2006). Judging by the process and results, CSR is less encouraging. The sustainability of CSR’s objectives makes it less representative of the process, and the effectiveness of CSR is still being debated (Arora et al. 2020). A previous study reported that CSR in developing countries entails pragmatic implementation, ineffective mechanisms, and poor achievements and social outcomes (Jain et al. 2021). CSR is organized based on a narrow view that focuses on what to do with profit rather than how to create profit (Sharma and Singh 2022). Different European practices focus more on internal aspects to ensure the sustainability of CSR implementation (Macassa et al. 2021), which shows a long-term orientation. There are different needs for understanding CSR in developing countries (Nguyen et al. 2021).

In Indonesia, CSR practices are carried out through policies such as those realized by state-owned enterprises. SOEs’ roles include providing guidance and assistance to entrepreneurs from economically vulnerable groups, cooperatives, and the community through corporate social responsibility (CSR) following prevailing laws and regulations (Ramdhan et al. 2022). The legal approach for CSR is a “coercive and binding” effort to solve educational, health, and environmental issues in developing countries like Indonesia. The regulations as standard guidelines on mandatory CSR are contained within a vacuum and are confusing (Sefriani and Wartini 2017). Companies are more concerned with avoiding legal consequences than guaranteeing balance, as suggested by Carroll (2017). But various parties have interest in CSR rather than it containing neutral essential wisdom (Juwana 2005). Van Marrewijk (2003) asserted that bias in CSR causes other biases due to specific interests. This situation indicates a conflict of legal and economic interest of CSR implementation. There has been a long-term feud between legal and economic approaches in CSR implementation (Windsor 2006). CSR implementation still needs to be integrated into community norms and practices such as local beliefs (religion) and government systems despite the cultural challenges (Ooi et al. 2021). CSR recontextualization is a vital need (Ibrahim et al. 2023). Furthermore, CSR practices focus more on corporate image, a lack of consistency and limitations, and the selection of CSR activities that need to pay attention to stakeholders’ interests.

In addition to regulatory issues, the results of previous studies show that CSR implementation focuses more on the macro and ignores the micro (Yu et al. 2021). However, as Kim and Kim (2021) argued, the effect of CSR on the internal stakeholder, such as employees, who ultimately determine a company’s performance, still needs to be researched. CSR pays little attention to employees’ interests (Jung and Kim 2016). Deng et al. (2020) discussed the negative impact of CSR on employees. Currently, CSR function needs to be understood as an effort to strengthen the company’s performance structure while upholding ethical responsibility (Farooq et al. 2021; Silva et al. 2023). Although other studies have reported a positive relationship between CSR and employees (Verčič and Ćorić 2018; Sheel and Vohra 2016), there is inconsistency in the findings of the effect of CSR implementation on employees. Internal CSR is considered more effective for employees (Ng et al. 2019). Internal CSR can increase employee satisfaction, which is likely to increase employee performance (Obeidat et al. 2018; Golob and Podnar 2021; Chatzopoulou et al. 2022). Another contradiction is that CSR does not always provide positive results such as performance and engagement (Rupp et al. 2018).

Current CSR implementation should be related to profit, the structure of the corporation’s performance, and the ability to implement CSR principles, as stated by Elkington (1998)—namely, the triple bottom line. The results of previous studies show that the implementation and concept of CSR need to be clarified with existing problems so that CSR can be optimized. The first gap is the need for clarity in CSR construction included in formulated policies to reduce the function of CSR. Problems with the implementation of CSR begin with the understanding of CSR internally and externally (Ramdhan et al. 2022; Zhong et al. 2022). The second gap is that CSR implementation is more external. Focusing on internal CSR has not been a priority, even though it is needed to support the foundation of companies, which still needs to be improved (Ramdhan et al. 2022). Although internal CSR studies are evolving and previous studies have shown a positive relationship between individual psychological aspects and reduced adverse work outcomes, the studies still need to be clarified (Chen and Liu 2023). There are calls for CSR research that multiplies specific issues at the individual level.

Therefore, it is necessary to study CSR based on several propositions in the micro foundation theory. In this regard, Chomvilailuk and Butcher (2023), Farooq et al. (2021), Golob and Podnar (2021), and Song and Tao (2022) showed the positive impact of internal CSR on employees, deepening the understanding of internal CSR as a future research agenda (Onkila and Sarna 2022). This study supports the understanding of CSR at the micro level, which is considered still lacking (Bu and Chen 2023; Carlini and Grace 2021; Giang and Dung 2022; Liu et al. 2023; Yu et al. 2021).

2. Corporate Social Responsibility (CSR)

3. Work Engagement

4. Job Satisfaction

5. Job Performance