CSR is an inadequate concept Corporate Social Responsibility

  • Date:01 Jun 2005
  • Type:CompanyDirectorMagazine
Debate regarding Corporate Social Responsibility (CSR) globally is ongoing with a recent addition to the discourse by the perceived authority on capitalism The Economist (January 22-28, reprinted in Company Director), in which some interesting ideas as well as some less plausible ones were raised.

CSR is an inadequate concept

Let us create real value through corporate social opportunity and determined leadership, says Sophie Constance*

Debate regarding Corporate Social Responsibility (CSR) globally is ongoing with a recent addition to the discourse by the perceived authority on capitalism The Economist (January 22-28, reprinted in Company Director), in which some interesting ideas as well as some less plausible ones were raised.

The extensive diatribe published in "The good company" - a skeptical look at corporate social responsibility - has issued an intellectual call to arms to those concerned about the failure of markets to produce "responsible corporate behaviour".

Despite there being no unified interpretation of what CSR means, there are fundamental principles, of which the main one is that a company is responsible for providing more than just benefits for shareholders. It has a role to play in treating employees well, developing sound corporate governance, trading fairly, preserving the environment, and effective stakeholder relations. Although CSR is meant to target companies to be more socially responsible, it is not the best way to transform behaviour of corporations.

By law the corporation is a person. However, it is a very peculiar kind of person, whose responsibilities under that law are primarily to shareholders. If socially responsible behaviour cannot be justified by improvements in the share price, then the corporation is the kind of "person" who is not legally required to act in this way.

"The corporation has developed into the worst kind of citizen: one that claims all the rights but shirks the responsibilities of citizenship," said corporate lawyer R Hinkley in 2004. The primary purpose of business, states Ethical Corporation, is the efficient production and distribution of goods and services that society needs. The right to take profit from this social function demands justification.

It is impossible to introduce responsible corporate behaviour into the economic system without making trade-offs - some may say sacrificing essential benefits afforded by that system. Nonetheless, this apparently radical transformation is quite compatible with successful business management (although it will require rethinking and changing the way businesses are managed).

However, the very definition of a company assumes an empty vessel without recognising that it is made up of people who think, feel and function as total beings.

Responsibility is an essentially negative conception: it is a duty to refrain from certain forbidden actions. CSR works on this premise of negative principles consisting of fear tactics and invites a minimalist approach to compliance. However, questions of ethics are not usually settled simply by asking whether the proposed course of action violates the letter of the relevant code. As a result, CSR in this negative sense is compatible with serious ethical lapses that are not expressly forbidden by the relevant codes of conduct. It may also coexist with wider, systemic violations of law. Even Enron, which received awards as leaders in CSR, could not escape the systemic rot throughout the corporation.

The negative conception of responsibility allows for a gap between spin and substance or authenticity. This gap between spin/greenwash and substance makes the public and consumers cynical and suspicious. This is revealed in research studies where consumers do not pay a premium for eco-friendly and socially responsible things, as they doubt they are really getting the genuine quality.

Furthermore, the negative conception discourages innovation. Aside from fear tactics, CSR works on risk minimisation. It may be enough to merely meet compliance requirements for some companies with the focus on the immediate short-term, "business as usual" approach. Greatness and achievement come from setting challenges, not from settling for mediocrity by mere compliance.

It is better to reframe the issue in terms of leadership. In this way we recognise potential opportunities and the creation of value with the stretch goal of leadership. BP made a stretch goal of 10 years to reach its solar energy goal and achieved it in seven. In a February interview in London, Proctor & Gamble's VP of corporate sustainability Dr Peter White reinforced the difference in the behaviour of progressive businesses which have taken on this approach.

In conjunction with the World Business Council of Sustainable Development many of the leading multinationals and European companies are involved in proactive initiatives for the creation of opportunities which can lead to a relative if not a competitive advantage.

Companies can create opportunities that both benefit society and enrich their shareholders. This innovative approach has led to the creation of new markets, and is superior to CSR compliance-only behaviour or ad hoc lip service because it is aligned to the core business strategy and based on value creation.

In turn, this has created value for the company on numerous levels, including new products, and processes for identifying emerging markets. Procter & Gamble has been on this journey since 1999 and is focusing on the UN's Millennium Development goal of providing improved access to safe drinking water, developing an affordable water purifier, which will halve disease in countries such as Haiti and Pakistan.

In addition to helping societies in real need, they are creating a new market opportunity for the firm. Building on this theme of water care they have other public-private partnerships in place, and most importantly these initiatives relate to their core business rather than something short-lived and unrelated.

To prevent the next couple of years amounting to more mediocrity, let us create real value through corporate social opportunity and determined leadership by harnessing resources for effectiveness through integration and accountability.

* Sophie Constance is director of Constance Creative Marketing - Corporate Social Leadership

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