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The world according to CSR
SURVEY: CORPORATE SOCIAL RESPONSIBILITY
The world according to CSR
Jan 20th 2005
From The Economist print edition
Good corporate citizens believe that capitalism is wicked but redeemable
OVER the past century or so, and especially in the past 50 years, the western industrial democracies have experienced what can only be described as an economic miracle. Living standards and the quality of life have risen at a pace, and to a level, that would have been impossible to imagine in earlier times.
This improvement in people's lives, staggering by any historical standard, is not measured solely in terms of material consumption�important though it is, for instance, to have enough to eat, to keep warm in winter, to be entertained and educated and to be able to travel. In addition to material gains such as these, and to all the other blessings of western "consumer society", broader measures of well-being have raced upward as well: infant mortality has plummeted, life expectancy has soared, and the quality of those extended years of life, in terms of freedom from chronic sickness and pain, is better than earlier generations ever dreamed it could be.
All this has been bestowed not just on an elite, but on the broad mass of people. In the West today the poor live better lives than all but the nobility enjoyed throughout the course of modern history before capitalism. Capitalism, plainly, has been the driving force behind this unparalleled economic and social progress. Yet today it is suspected, feared and deplored�and not just by the kind of energetic anti-capitalists who now and then put bricks through the windows of McDonald's.
According even to middle-of-the-road popular opinion, capitalism is at best a regrettable necessity, a useful monster that needs to be bound, drugged and muzzled if it is not to go on the rampage. Stranger still, this view seems to be shared by a good proportion of business leaders. Capitalism, if guided by nothing but their own unchecked intentions, would be wicked, destructive and exploitative, they apparently believe�bent on raping the planet and intent on keeping the poor outside the capitalist West in poverty.
In a much-discussed recent book, "The Corporation: The Pathological Pursuit of Profit and Power", Joel Bakan, a law professor at the University of British Columbia, lays bare the danger. His themes were further developed and illustrated in a film of the same title, which was also successful and well reviewed.
The corporation's legally defined mandate is to pursue relentlessly and without exception its own economic self-interest, regardless of the harmful consequences it might cause to others...Today, corporations govern our lives. They determine what we eat, what we watch, what we wear, where we work and what we do. We are inescapably surrounded by their culture, iconography and ideology. And, like the church and the monarchy in other times, they posture as infallible and omnipotent, glorifying themselves in imposing buildings and elaborate displays. Increasingly, corporations dictate the decisions of their supposed overseers in government and control domains of society once firmly embedded in the public sphere. Corporations now govern society, perhaps more than governments themselves do; yet ironically it is their very power, much of which they have gained through economic globalisation, that makes them vulnerable. As is true of any ruling institution, the corporation now attracts mistrust, fear and demands for accountability from an increasingly anxious public. Today's corporate leaders understand, as did their predecessors, that work is needed to regain and maintain the public's trust. And they, like their predecessors, are seeking to soften the corporation's image by presenting it as human, benevolent and socially responsible.
In Mr Bakan's view, CSR is mostly a fraud. Companies, after all, are in "pathological pursuit of profit and power". CSR is merely a means to those ends, a way to ingratiate capitalism to a rightly suspecting public. The book's jacket has blurbs of generous praise not just, as you might expect, from Noam Chomsky but also from an investment-fund manager and a CEO, who says it is holding up "a mirror for [corporations] to see their destructive selves as others see them".
Many businessmen do seem to recognise themselves in that mirror. And popular culture has the corporate psycho in plain view�which is remarkable, given the corporation's suffocating grip on all thoughts and deeds. What is the capitalist ethos according to Hollywood? "Greed is good," as Gordon Gekko explained in "Wall Street". From "RoboCop" (the military-industrial complex) to "Super Size Me" (fast-food tyrants) and back again, the brave unequal war against corporate dominion is waged.
This paranoid fear of capitalism, shared by so many of its leading practitioners, boils down to two main ideas. First, profit in its own right has nothing to do with the public good. A company in pursuit of profit is seeking a purely private gain. If the pursuit of profit is to yield an advance in social welfare, then something else, acting with deliberation and intelligence from outside the corporation, must intervene. Second, in their mad pursuit of private gain, companies are driven by the logic of their quest to place crippling burdens on society and on the environment.
So far as society at large is concerned, in other words, the untrammelled pursuit of profit yields nothing, but costs plenty. Unless it is checked either by CSR or (as Mr Bakan would prefer, if only as a first step) by double-strength government regulation, private enterprise makes losers of everyone but itself.
Private profit, public interest
The perceived tension between private profit and public interest pervades the CSR literature. Yet the idea is never examined. It is always regarded as self-evident.
The top executives at Royal Dutch/Shell have lately been acting as CSR thought-leaders�and they are CSR champions in other ways as well (through the activities of the generously supported charitable activities of the Shell Foundation, for instance). Shell has a lot of popular suspicion to live down, following the scandal over its operations in Nigeria, for instance, and the controversy surrounding its plans for the disposal of the Brent Spar oil-drilling platform in the North Sea. Its senior executives have done their best. In a leaflet explaining why the company had embraced CSR, Sir Mark Moody-Stuart, who was chairman between 1998 and 2001, and before that managing director, wrote:
[M]y colleagues and I on the committee of managing directors are totally committed to a business strategy that generates profits while contributing to the well-being of the planet and its people.
That seems entirely unobjectionable, you might think: a commitment to motherhood and apple pie. But the clear implication�and Sir Mark, to judge by other speeches and articles, buys it wholesale�is that if Shell simply made profits for its owners, that would in itself contribute nothing to "the planet and its people". From this it follows that if Shell is to justify its activities to society at large, it has to do more than just make money for its owners. Therein lies the case for CSR. But is the premise actually true? True or false, it is never challenged.
One of the world's foremost CSR networks and organisations is the World Business Council for Sustainable Development. Its membership is made up of 175 big multinationals, including Shell, alongside firms such as ABB, Dow Chemical, Ford, General Motors, Procter & Gamble, Time Warner and so on. One of the council's publications begins:
Although the rationale for the very existence of business at law and in other respects is to generate acceptable returns for its shareholders and investors, business and business leaders have, over the centuries, made significant contributions to the societies of which they form part.
Why yes. If you compare people's lives in the West today with those of people living, say, a century ago, or two centuries ago, it would be right, if perhaps a little miserly, to concede that business has made some "significant contributions". But in the council's opinion these moderately important benefits did not arise because businesses generated acceptable returns for their owners; they arose despite that fact. Profit, unfortunately, is necessary, as the council sadly notes: otherwise you cannot have business, along with the possibility of those quite useful contributions. But those contributions have to be separately willed. It is simply not in the nature of business as such to contribute. That is an add-on, a responsibility that business may choose to discharge or not discharge, as it sees fit.
So, anti-capitalists believe this; angry law-school professors (whose own significant contributions cannot be in doubt) believe it; and the leaders of international big business believe it. For good measure, many industrial-country governments, acting singly or in concert, believe it as well. Britain is just one of many countries to have designated a minister responsible for encouraging CSR initiatives. In 2001 the European Commission published a consultative paper entitled, "Promoting a European Framework for Corporate Social Responsibility". The aim is "to launch a wide debate on how the European Union could promote corporate social responsibility at both the European and international level". Values, it says, "need to be translated into action".
Leading international institutions such as the World Bank, the United Nations, the Organisation of Economic Co-operation and Development, and indeed more or less any outfit of that sort you care to name, endorse the view that profit serves an exclusively private interest, and that blind pursuit of profit is therefore likely to prove socially harmful.
The United Nations is especially keen on CSR, as part of a broad new approach to global governance. It continues to promote its "Global Compact", launched at the World Economic Forum in 1999. This initiative aims to draw together businesses and business organisations, NGOs, and UN and other international agencies. The goal of this new "tripartism"�an ongoing discussion among governments, companies and civil society (which is how the UN refers to NGOs)�is to find ways to "underpin the free and open market system with stable and just societies".
It is one thing to believe that profit-seeking serves no public interest directly. It is another to believe that profit-seeking, unless tempered and channelled by CSR or in some other way, actually works against the public interest. This second idea, already noted, is an extension of the first. And this is where "sustainable development" comes in.
The concept of sustainable development puts flesh on the idea that business left to its own devices is dangerous. Untamed profit-seeking, it is argued, puts strain on the environment and exploits workers. At the same time the goal of sustainable development points to a more concrete agenda for CSR: while pursuing profit, enlightened companies should take care to protect the environment and uphold the rights of workers (and others) as well. Hence the "triple bottom line" which thought-leaders on CSR (including the United Nations and the European Commission) want companies to monitor and report: don't just aim to make money, but protect the environment and fight for social justice as well.
Unsustainable
One problem with the triple bottom line is quickly apparent. Measuring profits is fairly straightforward; measuring environmental protection and social justice is not. The difficulty is partly that there is no single yardstick for measuring progress in those areas. How is any given success for environmental action to be weighed against any given advance in social justice�or, for that matter, against any given change in profits? And how are the three to be traded off against each other? (CSR advocates who emphasise sustainable development implicitly insist that there must be such a trade-off, at least when it comes to weighing profit against either of the other two.) Measuring profits�the good old single bottom line�offers a pretty clear test of business success. The triple bottom line does not.
The problem is not just that there is no one yardstick allowing the three measures to be compared with each other. It is also that there is no agreement on what progress on the environment, or progress in the social sphere, actually mean�not, at least, if you are trying to be precise about it. In other words, there are no yardsticks by which different aspects of environmental protection can be compared even with each other, let alone with other criteria. And the same goes for social justice.
One company reduces its emissions of greenhouse gases. One increases its spending on recycling. Another provides free child-care facilities for its workers. Another raises the wages of its lowest-paid workers. All of these things cost money: suppose, for the sake of argument, that all four have reduced profit by the same amount. Which company has done most to protect the environment? Which has done most to advance social progress? Overall, how far has each company improved its triple bottom line? Bearing in mind the cost, can you even say that any of them have done so?
The great virtue of the single bottom line is that it holds managers to account for something. The triple bottom line does not. It is not so much a licence to operate as a licence to obfuscate.
CSR advocates could reply that this misses the point. The idea of the triple bottom line is not that the three-dimensional performance of business can ever be judged as precisely as its orthodox one-dimensional performance. The triple bottom line is just shorthand for saying: take other things into account, acknowledge that profit isn't everything, and don't pursue profit relentlessly, as you would otherwise be inclined to, even at the expense of damage to the environment and infringements of the rights of workers and other stakeholders. You cannot be precise about these things, but at least you can recognise the social and environmental peril of too narrow a focus on profit.
That is a perfectly reasonable line of argument�or it would be, if a narrow focus on profit really did endanger the environment, systematically infringe the rights of workers and stakeholders, and in general fail to serve the public interest. That is the world according to CSR, but is the world really like that? The short answer is no. For a slightly longer answer, read on.
More on Corporate social responsibility from the Economist:
What does corporate social responsibility really mean?
Corporate social responsibility (CSR) blossoms as an idea
Corporations need to be socially responsible to build their "reputational capital"
Corporate social responsibility is all the rage - does it mean anything?
Anglo-Saxon corporation: case study for Corporate social responsibility
Reebok: case study for Corporate social responsibility
CORPORATE SOCIAL RESPONSIBILITY (CSR) Policies
The world according to CSR
Companies that merely compete and prosper make society better off
Good corporate citizens, and wise governments, should be wary of CORPORATE SOCIAL RESPONSIBILITY
Source: The Economist
CONTENT COPYRIGHT The Economist. THIS CONTENT IS INTENDED SOLELY FOR EDUCATIONAL PURPOSES.
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