The CSR Debates
The Economist recently reported that the corporate social responsibility (CSR) movement has already “won the battle of ideas.” But then the business magazine immediately proceeded to devote a great deal of newsprint to it, claiming the CSR concept is largely misguided and based on “mixed-up economics” (“Survey,” 2005).
In truth, the war of ideas is far from over when it comes to social responsibility, and that’s not only because a well-known business magazine decided to spark a debate. As a concept and social movement, CSR simply remains a work in progress. It encompasses notions that are both attractive and influential, but there remains a lot of uncertainty about which CSR strategies and standards best serve society and companies.
The argument against CSR goes as follows. By definition, profitable companies deliver products and services that people are willing to pay for, so firms are already delivering a social good. In fact, some argue, this process has helped make people living in developed countries among the richest and healthiest in history. Therefore, companies shouldn’t be required to provide any “extra” social good, since this is only likely to erode shareholder value and keep the economic system from operating at full efficiency and effectiveness.
The argument in favor of CSR is more complex. Some advocates point to everything from a rash of corporate scandals to a series of environmental disasters to show that businesses too often profit at the expense of the larger community via irresponsible business practices. They argue that companies shouldn’t do anything – legal or otherwise – that has a seriously negative impact on the larger society. Although this seems sensible, it’s difficult to distinguish this type of CSR from basic business ethics.
Others take the concept further. They believe that, as the entities that have accumulated huge amounts of social power, corporations should do more than just act in an ethical manner – they should be positive forces for social good. These advocates want corporations to focus as much attention on environmental and social responsibilities as on finances. The idea, as one recent article on the subject puts it, is to establish “a positive company reputation and brand in the public eye through good work that yields a competitive edge while at the same time contributing to others” (Lockwood, 2004).
But this begs the question. If a company’s good deeds truly yield a “competitive advantage,” then why all the fuss? Shouldn’t socially responsible corporations simply be able to drive their less-responsible competition out of business?
It’s not that simple, of course. Consumers are often unaware of a corporation’s reputation for social responsibility and often base their buying decisions on other factors, such as cost. And a company might reduce its costs – at least in the short term – through irresponsible business practices, such as the illegal or at least unethical dumping of pollutants.
Moreover, businesses themselves aren’t always certain whether or not their CSR initiatives give them a competitive edge, making many reluctant to invest heavily in such initiatives. Until there are widely accepted indicators that allow companies, investors and consumers to accurately gauge the effectiveness of CSR strategies, it’s unlikely that the social responsibility movement will reach its full potential.
That’s not to say it won’t happen. In fact, the social and intellectual frameworks required to support CSR continue to grow and strengthen. Companies that want to become known as socially responsible players can join organizations such as Social Accountability International’s Corporate Involvement Program or the United Nations’ Global Compact (Lockwood, 2004). And the powerful International Organization for Standardization has begun developing voluntary global guidelines for CSR (Walsh, 2005).
There are also popular ideas such as “triple bottom line” accounting, which looks at a company’s social/ethical and environmental performance as well as its traditional financial performance. At least one expert argues that this should become a standard accounting practice, one required by the U.S. Securities and Exchange Commission (Tschopp, 2003). Others have concluded that triple bottom line accounting is made of “vague and literally meaningless principles” (Norman and MacDonald, 2004).
Even as such necessary debates over CSR tools and standards continue, some business thinkers are trying to shift the CSR paradigm to new territory. University of Michigan strategic thinker C.K. Prahalad wants companies to focus on certain social problems – such as those faced by poor people in developing nations – because these populations present new market opportunities rather than because it’s the right thing to do (Overholt, 2005). David Grayson, coauthor of Corporate Social Opportunity, makes a similar argument, saying that CSR should focus on opportunity rather than just responsibility. He points to the example of Procter & Gamble, which has produced a water-purification product that targets the 1.2 billion people in the world who lack access to clean water (“Where,” 2005).
No doubt, further vigorous debates will ensue if more companies increasingly target the billions of poor people in the world. But at least this would guarantee that discussions about the social roles and responsibilities of corporations will not grow dull in the foreseeable future.
For more information on Social Accountability International, an organization that develops, implements and oversees verifiable social accountability standards, go to http://www.cepaa.org/
For more information on the UN’s Global Compact, go to http://www.un.org/Depts/ptd/global.htm
To read an online copy of The Economist’s “The Good Company” article, click here.
Members of the Society for Human Resource Management can get a copy of “Corporate Social Responsibility: HR’s Leadership Role” at http://www.shrm.org/research/quarterly/1204RQuart.asp
Information about CSR Europe, a nonprofit organization that promotes corporate social responsibility, can be found at www.csreurope.org.
Information about the U.S. Chamber of Commerce’s Center for Corporate Citizenship can be found at http://www.uschamber.com/ccc/default
For information about the Organization for Economic Cooperation and Development’s Corporate Governance Principles, click here.
Documents used in the preparation of this TrendWatcher include:
Canniffe, Mary. “Corporate Social Responsibility.” Accountancy Ireland, February 2005, pp. 6-9.
Lockwood, Nancy R. “Corporate Social Responsibility: HR’s Leadership Role.” 2004 SHRM Research Quarterly, ABI/INFORM Global, December 2004, pp. 1-10.
Norman, Wayne, and Chris MacDonald. “Getting to the Bottom of the ‘Triple Bottom Line.’” Business Ethics Quarterly, Vol. 14, Iss. 2, 2004, pp. 243-262.
Overholt, Alison. “A New Path to Profit.” Fast Company. ProQuest. January 2005.
Portsmouth, Ian. “Advocates of Corporate Social Responsibility Would Have You Feel Guilty About Making Money. Don’t Let Them.” Profit. ProQuest. March 2005.
“Survey: The Good Company.” The Economist. ProQuest. January 22, 2005.
“Survey: The Union of Concerned Executives.” The Economist. ProQuest. January 22, 2005.
“Survey: The World According to CSR.” The Economist. ProQuest. January 22, 2005.
Tschopp, Daniel. “It’s Time for Triple Bottom Line Reporting.” CPA Journal, December 2003, p. 11.
Walsh, Mark. “The World’s Workers May Catch a Break.” Business Week. ProQuest. March 14, 2005.
“Where Opportunity Knocks.” New Zealand Management. ProQuest. February 2005.
In truth, the war of ideas is far from over when it comes to social responsibility, and that’s not only because a well-known business magazine decided to spark a debate. As a concept and social movement, CSR simply remains a work in progress. It encompasses notions that are both attractive and influential, but there remains a lot of uncertainty about which CSR strategies and standards best serve society and companies.
The argument against CSR goes as follows. By definition, profitable companies deliver products and services that people are willing to pay for, so firms are already delivering a social good. In fact, some argue, this process has helped make people living in developed countries among the richest and healthiest in history. Therefore, companies shouldn’t be required to provide any “extra” social good, since this is only likely to erode shareholder value and keep the economic system from operating at full efficiency and effectiveness.
The argument in favor of CSR is more complex. Some advocates point to everything from a rash of corporate scandals to a series of environmental disasters to show that businesses too often profit at the expense of the larger community via irresponsible business practices. They argue that companies shouldn’t do anything – legal or otherwise – that has a seriously negative impact on the larger society. Although this seems sensible, it’s difficult to distinguish this type of CSR from basic business ethics.
Others take the concept further. They believe that, as the entities that have accumulated huge amounts of social power, corporations should do more than just act in an ethical manner – they should be positive forces for social good. These advocates want corporations to focus as much attention on environmental and social responsibilities as on finances. The idea, as one recent article on the subject puts it, is to establish “a positive company reputation and brand in the public eye through good work that yields a competitive edge while at the same time contributing to others” (Lockwood, 2004).
But this begs the question. If a company’s good deeds truly yield a “competitive advantage,” then why all the fuss? Shouldn’t socially responsible corporations simply be able to drive their less-responsible competition out of business?
It’s not that simple, of course. Consumers are often unaware of a corporation’s reputation for social responsibility and often base their buying decisions on other factors, such as cost. And a company might reduce its costs – at least in the short term – through irresponsible business practices, such as the illegal or at least unethical dumping of pollutants.
Moreover, businesses themselves aren’t always certain whether or not their CSR initiatives give them a competitive edge, making many reluctant to invest heavily in such initiatives. Until there are widely accepted indicators that allow companies, investors and consumers to accurately gauge the effectiveness of CSR strategies, it’s unlikely that the social responsibility movement will reach its full potential.
That’s not to say it won’t happen. In fact, the social and intellectual frameworks required to support CSR continue to grow and strengthen. Companies that want to become known as socially responsible players can join organizations such as Social Accountability International’s Corporate Involvement Program or the United Nations’ Global Compact (Lockwood, 2004). And the powerful International Organization for Standardization has begun developing voluntary global guidelines for CSR (Walsh, 2005).
There are also popular ideas such as “triple bottom line” accounting, which looks at a company’s social/ethical and environmental performance as well as its traditional financial performance. At least one expert argues that this should become a standard accounting practice, one required by the U.S. Securities and Exchange Commission (Tschopp, 2003). Others have concluded that triple bottom line accounting is made of “vague and literally meaningless principles” (Norman and MacDonald, 2004).
Even as such necessary debates over CSR tools and standards continue, some business thinkers are trying to shift the CSR paradigm to new territory. University of Michigan strategic thinker C.K. Prahalad wants companies to focus on certain social problems – such as those faced by poor people in developing nations – because these populations present new market opportunities rather than because it’s the right thing to do (Overholt, 2005). David Grayson, coauthor of Corporate Social Opportunity, makes a similar argument, saying that CSR should focus on opportunity rather than just responsibility. He points to the example of Procter & Gamble, which has produced a water-purification product that targets the 1.2 billion people in the world who lack access to clean water (“Where,” 2005).
No doubt, further vigorous debates will ensue if more companies increasingly target the billions of poor people in the world. But at least this would guarantee that discussions about the social roles and responsibilities of corporations will not grow dull in the foreseeable future.
For more information on Social Accountability International, an organization that develops, implements and oversees verifiable social accountability standards, go to http://www.cepaa.org/
For more information on the UN’s Global Compact, go to http://www.un.org/Depts/ptd/global.htm
To read an online copy of The Economist’s “The Good Company” article, click here.
Members of the Society for Human Resource Management can get a copy of “Corporate Social Responsibility: HR’s Leadership Role” at http://www.shrm.org/research/quarterly/1204RQuart.asp
Information about CSR Europe, a nonprofit organization that promotes corporate social responsibility, can be found at www.csreurope.org.
Information about the U.S. Chamber of Commerce’s Center for Corporate Citizenship can be found at http://www.uschamber.com/ccc/default
For information about the Organization for Economic Cooperation and Development’s Corporate Governance Principles, click here.
Documents used in the preparation of this TrendWatcher include:
Canniffe, Mary. “Corporate Social Responsibility.” Accountancy Ireland, February 2005, pp. 6-9.
Lockwood, Nancy R. “Corporate Social Responsibility: HR’s Leadership Role.” 2004 SHRM Research Quarterly, ABI/INFORM Global, December 2004, pp. 1-10.
Norman, Wayne, and Chris MacDonald. “Getting to the Bottom of the ‘Triple Bottom Line.’” Business Ethics Quarterly, Vol. 14, Iss. 2, 2004, pp. 243-262.
Overholt, Alison. “A New Path to Profit.” Fast Company. ProQuest. January 2005.
Portsmouth, Ian. “Advocates of Corporate Social Responsibility Would Have You Feel Guilty About Making Money. Don’t Let Them.” Profit. ProQuest. March 2005.
“Survey: The Good Company.” The Economist. ProQuest. January 22, 2005.
“Survey: The Union of Concerned Executives.” The Economist. ProQuest. January 22, 2005.
“Survey: The World According to CSR.” The Economist. ProQuest. January 22, 2005.
Tschopp, Daniel. “It’s Time for Triple Bottom Line Reporting.” CPA Journal, December 2003, p. 11.
Walsh, Mark. “The World’s Workers May Catch a Break.” Business Week. ProQuest. March 14, 2005.
“Where Opportunity Knocks.” New Zealand Management. ProQuest. February 2005.