Answering the CSR sceptics
18 October 2016
Are you one of the people that have serious doubts about this thing called corporate social responsibility?
In a recent post, Wayne Visser posed a number of what he called “awkward questions for fans of CSR”. I find the term “fan” a bit odd in this context, but we’ll go with it.
He posed some questions of real substance – and certainly some of them are representative of themes I’ve heard elsewhere. So I thought I would give my own responses in this post here.
Q1. Are companies more a part of the problem or the solution? In other words, is the net impact of business positive or negative?
It doesn’t do to oversimplify this. There is no one problem. There is no one type of impact. There are no solutions that have zero negative consequences.
Generally speaking businesses have fantastic positive social and economic impact. They create products and services that meet our needs. They create jobs and pass some of their created wealth into public goods via taxation that pays for essential services we all depend on. In so doing, they create an environmental impact, the significance of which differs depending on the sector those companies are in.
You could trade off the positives against the negatives to come up with a “net impact” score, but it doesn’t work because positives in one don’t automatically compensate for negatives in another.
Socially and economically businesses provide great benefits. Environmentally, the aggregate impact of all of that activity – to service our needs – is currently unsustainable. You can’t offset that reality with social or economic benefit. Science cannot be distracted by human priorities. It will bend us to its system whether we like it or not.
When we happily consume the products and services, it’s a bit rich to then describe the businesses as the problem. The truth is that while we – apart from a relatively small niche – are remarkably unwilling to reduce our personal consumption (which is the bit in our own power), companies are showing themselves more ready to innovate and change to make their processes and business models more sustainable.
So right now, the net impact of our aggregate behaviour as a species is negative. Businesses have the potential to be part of the solution – but it doesn’t happen by default. If it did, we wouldn’t need CSR or any other factors designed to create change. That’s why we need people with values working in businesses, who see this as part of the wealth creation agenda for the coming decades.
Q2. Given that CSR has increased dramatically over the same 50 years that many of the global problems … have been getting worse, does that mean that CSR is ineffective?
CSR, as an umbrella term for a multitude of initiatives, has increased in the last 20 years in response to the changes in expectations on businesses by society. Those expectations have changed precisely because some of those problems have become more visible and higher priority. It is cause and effect.
It’s easy to generalise and suggest all problems are getting worse. Actually, a lot of progress has been made. Twenty years ago, we faced the destruction of the ozone layer – but that has been reversed. A number of specific diseases have been more or less eliminated. Certain persistent chemicals have been removed from products. And we now have the vision for a decarbonised energy sector and motor transport sector taking shape – something that seemed a very long way away even just ten years ago. There is less absolute poverty in the world. The value of diversity in the workplace and in public life is more strongly advanced than ever before, for all that we have to defend against a backlash.
These are not trivial advances. They show that we are on a path of improvement and development. Some of them have been achieved with the voluntary support of business. Some of them have not.
We know we have a long way to go, and there is such a thing as too slow, and too late. We need all the urgency we can muster for further progress – but to suggest that socially responsible business hasn’t played its part – and we can’t imagine how it would be key to the next part – is peculiar.
Q3. Could the whole CSR bonanza be an unwitting accomplice to the spate of corporate crimes of recent decades?
Q4. Am I quietly and unintentionally aiding and abetting our collective demise?
No. The people asking this question will often quote the fact that Enron, with its famous top-down corruption, had active and perfectly well-executed CSR programmes. If CSR can’t prevent corruption, then what is it for?
If I said to you – if the iPhone can’t stop corruption, what is it for? – you would look at me as though I were mad. “The iPhone isn’t designed to stop corruption, it’s designed to have apps, and make calls and stuff”.
CSR is about companies taking responsibility for their social and environmental impact, and taking action beyond compliance to do so. It is not, and has never pretended to be, a system that can protect us from genuinely corrupt and evil leadership. That’s what we have laws for. What the executives at Enron did was illegal. They were caught. They went to prison.
The fall of Enron happened in 2001. The fact we’re still quoting it in this context shows that such instances are still the exception rather than the rule. I’d rather focus on the potential for thousands of businesses to help us change the world for the better than obsess about a few greedy and corrupt individuals whose crimes will eventually find them out.
Q5. If CSR did nothing to prevent these companies acting like pirates on the high seas of finance, what good are they [sic]?
Question 5 relates specifically to the financial sector, and its role in the recent economic collapse.
There is a systemic challenge here, which I’ve written about before. The big problem is that our current system provides incentives that encourage executives at all levels to focus on the short-term, and to focus exclusively on the economic performance. Some socially responsible companies have tried to change this by bringing in a balanced approach to incentives, and by changing their business model so that the economic rewards are greater with sustainable business practices. This is not an easy one to solve, however. And at some point something beyond voluntary action is going to need to follow, based on the experience of the first-movers and the innovators. The fact of that doesn’t diminish the need for CSR – it only strengthens it.
You can demonise them after the event, call them pirates and all that, but there is no evidence that most of these people did much other than follow very strong incentives that were placed in front of them. How we change those incentives is a big societal question. It’s one that we stop focusing on when we fall into the comfort zone of deciding it’s ‘us vs them’.
Q6. If CSR cannot form the bedrock of ethical corporate behaviour, does it deserve to have ‘responsibility’ in its title?
Well, at the risk of wasting time debating semantics, yes. Responsibility is a voluntary thing. It implies an element of choice. Taking responsibility for your wider impacts, and building them into how you do business. It goes further than ethics. It goes further than legal compliance.
The fact that some companies may try to convince people that they are socially responsible while hiding an unethical core hardly diminishes the value of the thing itself. Of course, we then want expert commentators who can weed out the charlatans. We want CSR practitioners perhaps to be less quick to celebrate mediocrity (and the companies that don’t really get it rarely go much beyond the mediocre because they’re trying to spend as little as they can get away with while still getting the image).
Q7. If CSR is used to legitimise businesses or practices that are, at heart, irresponsible, surely CSR is partly to blame for the various corporate ‘sins’ that go undetected and unpunished?
If the movement to encourage businesses to take responsibility for their impact on society can be undermined by a few bad apples who might pretend to agree, while doing the opposite, what’s the logic of that position? That we should all give up and go home? That we should sit around twiddling our thumbs waiting for governments to suddenly behave differently to how they have ever done historically and come up with some magic solutions regardless of how unpopular they may be with their electorate?
CSR has led major companies to improve working conditions in their supply chains, to eliminate child labour, to reduce the environmental impact of our activity, to embrace diversity, to improve education and health, and social inclusion.
It is a moving target, because society’s expectations change and evolve over time. The whole tax equation wasn’t considered part of the agenda until recently, but a number of societies decided otherwise. CSR can’t “legitimate practices that are irresponsible”. CSR is the process of adapting to society’s changing definition of what is irresponsible. What is held to be unacceptable today was not controversial twenty years ago. And we might expect the same in the next twenty years as well.
There is a lot more to be done for sure. Once you’ve ran the first mile of a marathon, do you stop and question what’s the point since you’ve done all this running and you’re still not at the end? Or do you focus on running the next mile?
I've posted before with answers to arguments against CSR.
The first one is here: Arguments against CSR - and some answers.
The second one here: Arguments against CSR - redoubled.