Corporate Responsibility and Long-Term Value Creation in Tech: Navigating Systemic Risks and Regulatory Exposure

The tech sector's evolution in 2025 is defined by a dual challenge: managing systemic risks in social media platforms and aligning corporate responsibility with long-term value creation. As regulatory frameworks like the European Union's Digital Services Act (DSA) intensify scrutiny of online platforms, investors must assess how compliance costs, reputational risks, and strategic CSR initiatives shape the financial trajectories of tech giants. This analysis explores the interplay between regulatory exposure, corporate responsibility, and financial performance, drawing on recent developments in Europe, Australia, and beyond.

Systemic Risks: A Regulatory Crosshairs

The EU's DSA has identified systemic risks that transcend traditional content moderation, including the proliferation of counterfeit goods, unauthorised pharmaceuticals, and AI-generated harms. According to a report by , platforms like TikTok and Meta are under fire for failing to provide researchers with meaningful access to public data, a violation that could trigger fines of up to 6% of global revenue-$9.87 billion for Meta and $1.38 billion for TikTok. Beyond financial penalties, these risks expose platforms to reputational damage and operational disruptions. For instance, the EU has flagged "dark patterns" in Meta's user interfaces that discourage users from flagging illegal content, violating the DSA's "Notice and Action" mechanisms.

Emerging technologies, particularly generative AI, amplify these risks. The EU's report highlights how AI is being weaponized to create manipulated media and child sexual abuse material, underscoring the need for proactive governance. Meanwhile, risks to minors-such as exposure to harmful challenges and addictive design features-have spurred regulatory action globally, from Australia's under-16 social media ban to Malaysia's proposed restrictions.

Compliance Costs: A Financial Burden or Strategic Investment?

Regulatory compliance is reshaping the cost structures of social media platforms. In Australia, Snap's rollout of age-verification tools to comply with the under-16 ban has already incurred significant expenses. The company's ConnectID tool, which verifies users via bank-linked data, reflects a strategic pivot to meet regulatory demands while minimizing data privacy risks. However, the financial toll is evident: Snapchat's Australian revenue grew by just $300,000 in 2024, despite having 8 million monthly users in the country. The enforcement of the ban in December 2024 is expected to further erode user engagement and monetization potential, particularly in a demographic that constitutes 18% of Snapchat's global user base.

Similarly, TikTok and Meta face escalating compliance costs under the DSA. The EU's recent enforcement actions highlight systemic gaps in data transparency and user empowerment, with potential fines threatening to eat into profit margins. For example, Meta's alleged use of "dark patterns" in content moderation systems could lead to ongoing periodic penalties, compounding the costs of redesigning user interfaces.

Corporate Responsibility as a Strategic Imperative

Amid these challenges, corporate responsibility initiatives are increasingly framed as tools for long-term value creation. Research published in underscores how CSR in technological innovation (CTR) drives sustainable competitive performance by aligning stakeholder needs with profit motives. For social media platforms, this means embedding CSR into core operations-such as virtual volunteering, green technologies, and diversity, equity, and inclusion (DEI) programs-to build brand trust and employee engagement. The DSA itself mandates such alignment. Platforms are now required to offer users greater control over personalization algorithms and disable features like "streaks" to mitigate addictive use patterns. These changes, while costly, position companies to avoid regulatory backlash and foster user loyalty. For example, Meta's shift to private-by-default accounts for minors reflects a proactive approach to youth protection, potentially insulating the company from future litigation.

Case Studies: Snap, TikTok, and Meta in the Regulatory Crosshairs

Snap's experience in Australia illustrates the financial and operational trade-offs of regulatory compliance. While the company's age-verification tools demonstrate innovation, the flat revenue growth in a key market raises questions about the long-term viability of its strategy. Investors must weigh whether these costs will be offset by improved regulatory relations or if they will erode margins.

TikTok's situation is more precarious. The EU's transparency violations and the U.S. ban threat under the Protecting Americans from Foreign Adversary Controlled Applications Act have created a regulatory quagmire. TikTok's rapid growth in social commerce-$32 million in daily U.S. sales by 2024-now faces existential uncertainty as it navigates potential divestiture and compliance overhauls. For Meta, the stakes are equally high: a $9.9 billion fine for DSA violations would dwarf its 2024 revenue, forcing a strategic recalibration in Europe.

Balancing Compliance and Innovation

The path to long-term value creation lies in harmonizing regulatory compliance with innovation. As Goodera notes, CSR is no longer a peripheral activity but a strategic lever for stakeholder engagement and digital transformation. Platforms that integrate CSR into their product design-such as TikTok's AI-driven content moderation or Meta's DEI initiatives-can mitigate systemic risks while enhancing user trust.

However, over-moderation remains a double-edged sword. The EU has warned that excessive content filtering can suppress legitimate speech, particularly from marginalized groups. This underscores the need for nuanced governance frameworks that balance safety with free expression.

Conclusion

The regulatory landscape for social media platforms is tightening, with systemic risks and compliance costs reshaping financial performance. Yet, corporate responsibility initiatives offer a pathway to long-term value creation by aligning innovation with societal needs. For investors, the key is to identify companies that treat regulatory challenges as opportunities for strategic reinvention rather than burdens. As the EU's DSA and global analogs evolve, the winners will be those that embed CSR into their DNA, leveraging compliance as a catalyst for sustainable growth.