Features

Has CSR reached its sell-by date? Part 2

Published

12 years ago

April 9, 2013

Michael Solomon

Previously I wrote an article that condemned corporate social responsibility (CSR) as it was currently understood and practiced by most companies. Below I set out my eight main charges against it in a little more detail.

Read part 1 here.

1 – CSR is a waste of precious business resources

CSR does not improve responsiveness, efficiency or profitability. It does not reduce risk or build trust. Paradoxically, it is more likely to increase risk and erode public trust.

Ten years ago, doing CSR was all the rage. Perhaps it still was around five years ago. Now, I have a strong sense that most businesses are doing it only because they perceive that they have very little choice. They believe they have to measure and report on some social and environmental indicators because everyone else is doing so, despite the costs involved and the fact that no one reads the resulting reports.

There is a long running joke that CSR reports are only read by students seeking environmental master’s degrees. Investors don’t read them.

A senior manager of one of the UK’s biggest investment funds recently told me reports are used solely to find the contact details of the report’s authors to arrange a face to face meeting or an interrogation over the telephone as to the firm’s management of social and environmental risks.

2 – CSR ignores the fundamentals of capitalism

Against the backdrop of rapid and serious environmental degradation, faltering prosperity and a widening wealth gap between the winners and the losers, businesses do not wish to be seen avoiding tax, violating human rights or cutting down rainforests. Nor do they wish to appear to have the single purpose of maximising profit for their shareholders.

However, our current economic system provides little option other than to focus on profit. So, as plainly evidenced in the world around us, despite what they might otherwise wish, businesses pursue irresponsible practices with the risk of looking bad and damaging their brands and reputations (see point 4).

The idea that CSR is practiced in the margins or as a bolt-on to normal business operations is reinforced by the failure of business to admit and discuss two inconvenient truths.

First, short termism forces business to offload costs onto society and the environment and to exploit consumers, employees, suppliers and others.

Second, businesses which refuse to do these things risk ceding advantage to less scrupulous competitors.

3 – It’s the brand and marketing people who control the message

For the failure to have the necessary honest debate about the role of business, its true impact on society and how we are going to create a global economy that is fit for the 21st century, I place a large part of the blame on the brand and marketing people.

These are the people with real power inside big businesses in that they control the message. Sadly, the great majority continue to follow the same old rules which dictate that the messages that emanate from the businesses must always be positive.

This means we simply never hear businesses talk about (profitable) processes which are fundamentally exploitative or unsustainable. We also don’t hear how emerging practices and processes which do have positive social and environmental impacts are still dwarfed by processes with negative impacts.

But this should only be expected as business makes the transition from a profits-at-any-cost approach to one where the pursuit of profit is balanced with the interests of society. The lack of openness and clarity means there is a lack of debate and engagement and this hurts us all.

There is clear conflict between the long-term vision and the ethical values business wishes to inculcate and embody and what it can practically achieve when it is forced to deliver financial results, quarter by quarter by quarter.

Until businesses start being honest about this, it is difficult to start the journey towards proper responsibility.

4 – Businesses that ‘do CSR’ keep making the wrong kinds of headlines

There appear to be yawning gaps between the pictures businesses paint of themselves in their CSR reports and what they actually do. Here are a few examples:

5 – CSR is about doing a little bit of good to offset a whole lot of bad

Having sound credentials regarding certain functions within a business doesn’t automatically equate with strong responsible performance right across the organisation.

Getting it right on environmental issues doesn’t make community impact, human rights, or financial and governance issues any less important. Neither can effective governance, for example, be used as a proxy for responsible marketplace practices.

We should be recognising and celebrating best responsible practices for what they are. We should be giving credit where it is due, thinking about how to improve further, and seeking to improve responsibility performance in all areas of the business.

However, good news can often be hard to come by and those marketing people like a positive story (see point 3).

As a result, it is often the case that the little bit of good that a company does is blown out of all proportion and presented as evidence of its burnished ethical credentials and values-driven approach. This can and does backfire, for example by eroding public trust and damaging, rather than enhancing, business reputation.

6 – CSR is downright fraud

The line between exaggeration and downright fraud is a fine one. In my view, and I believe a large proportion of the public feel similarly, it is a line crossed by many businesses.

CSR is at its most dysfunctional and harmful when employed by cynical businesses which manufacture positive impacts within some small part of their operations, and make a big song and dance about it, simply as a means to maintain licence to operate and so continue with unsustainable, irresponsible, exploitative, unfair practices.

7 – CSR is not relevant or believable to the man in the street

As both a term and a concept, CSR is meaningless to the man in the street.

Banks, oil companies, manufacturers, retailers, food brands, utility companies, mobile phone network operators, holiday operators et al, want to describe themselves as ethical, responsible, sustainable, fair, good corporate citizens, on ‘our side’ and/or values-driven. But a sceptical public simply doesn’t swallow it.

It is not just what we, the public, read or hear in the news: it is our own experiences which shape our views and beliefs. When things go more or less according to plan, the claim of businesses to be responsible is just a dull humming noise in the background. But when something goes wrong, as inevitably it will, these claims become problematic.

How fair, ethical and ‘on our side’ is a corporation that ‘deals’ with a problem by hiding behind a slick professional PR consultancy? Or one that provides a complaining customer no other redress than a minimum-waged call centre worker, located goodness knows where?

8 – CSR destroys public trust

For all the reasons given above, CSR destroys rather than enhances public trust in business and this lack of trust is a major problem.

For the business, it ultimately increases costs and risk. For the individual, it reinforces a sense of helplessness in that, no matter what one may wish, it is impossible to identify and support fair, ethical business and thereby push towards a more responsible society.

Can this be changed? I believe it can and, indeed, I believe that, for those businesses willing to make the first steps towards more openness and honesty, there will be great rewards to be gained. Public opinion is changing and businesses need to move with that change or be left behind.

Criticism without suggestions or solutions would be pointless. We have developed Responsible 100 as a tool to help businesses to start that journey. At the same time it is a public movement and a means for their customers, employees and investors to see what they are achieving.

We believe that through Responsible 100’s simple, powerful, flexible methodology, businesses can make real responsibility a driver of profitability and create a better business for a better world. Please join our growing movement at www.responsible100.com.

Michael Solomon is director of Responsible 100. On April 15, an event in London will question whether CSR has reached its sell-by date. Click here to find out more information.