Sunday, September 30, 2007

The great CSR con

The Economist recently reviewed Robert Reich’s book Supercapitalism in which he argues that corporate social responsibility (CSR) is a ‘dangerous diversion that is undermining democracy’. The gist of Reich’s argument is that corporations will claim to be socially responsible for actions that are of benefit to their ‘bottom line’ and that, ultimately, profits will always win over altruism as a motivation for anything they do.

To illustrate – as long as people are happy to consume Golden Munchie Burgers, the company that produces them will continue to wipe out areas of rainforest the size of Warwickshire on a weekly basis to produce grazing land for methane-producing cattle in order to ensure a steady supply of beef (and other derivatives).

But as soon as consumers get wind of the impact that Golden Munchie Global Corp are having on the environment, they might not be so keen to keep munching. Indeed they might even regard the act of boycotting Golden Munchie Burger Bars as a personal stand towards helping the environment. When this point is reached – and Golden Munchie find themselves selling fewer burgers – this is the time to start convincing the consumer that the company really does care about the environment.

This is achieved by having a visible and credible CSR policy in place so that consumers can continue to munch without guilt – or even believe that in some way they are helping the environment by buying more Golden Munchie Burgers.

So why is this undermining democracy? According to the article, Reich gives two reasons.

Firstly, if the public thinks that corporations are being socially responsible, they will put less pressure on governments to do something about issues of social concern - the environment, health, wealth, education or whatever cause needs to be addressed. There will be less perceived need by voters for radical political action.

Secondly, the concept of CSR encourages politicians themselves to ‘score points’ by criticising socially irresponsible corporations, rather than take action, i.e. pass laws, to force corporations to toe the line.

Rather than present CSR as a form of enlightened self-interest – or, in a Kantian sense, an act of public duty – this argument points to CSR as an ideological sleight-of-hand. By giving the appearance of acting in the interests of society, corporations are able to justify the free-market conditions in which they operate and avoid political intervention that might get in the way of maximising profits.

This is an interesting twist on Milton Friedman’s original argument that the only social responsibility that business has is to increase profits. Friedman’s influence on Thatcher - and all that followed, and continues to follow in today’s political environment! – suggests that the free market economy is still number one in the list of solutions to all the world’s problems. And if the free market depends on the continued willingness by consumers with a conscience to munch burgers, then CSR is clearly the way forward.

Filed under:
CSR     The Economist     Robert Reich     environment    democracy    Milton Friedman    free market

1 comment:

Anonymous said...

As a staunch supporter of CSR, I can see how companies that are not socially or environmentally responsible could simply view it as an obstacle, not something that would open their eyes to the negative impact of their production.
I do not think that this is an excuse for politicians to slack on their duties. There will always be something that needs to be corrected, and CSR is simply a way for companies to be proactive about their social and environmental impact.
I believe that consumers, hopefully sooner than later, will realize that they should expect more from companies and become apt at deciphering whether a company is truly being transparent about their practices.
But perhaps that is being to optimistic too soon. It never hurts to dream.