Articles

 

 

MHCi MONTHLY FEATURE:

April 2003

The Future of Corporate Social Responsibility: Sex is more popular than CSR!

Sex is more popular than CSR

Sex is, not surprisingly, more popular than Corporate Social Responsibility. Well, according to Google there are 142 million web sites devoted to sex while CSR comes in at 1.3million. Not even good as Madonna at 3 million but better than the phrases Ethical Company (239,000), Corporate Sustainability (259,000), Corporate Citizenship (188,000), and Triple Bottom Line (141,000). Surprisingly, CSR came in at the same rate as 'corporate profits' also at around 1.3mn. All these statistics donít mean an awful lot except to provide an indicator of the popularity of CSR as a concept.

In fact, before starting this article, I thought that interest in CSR was waning. This thought, again not based on any particular scientific evidence, was simply to do with my e-mail in-tray which seemed to mention CSR less. Maybe my thoughts were also coloured by all those interminable offers of Viagra, helping ex-dictator's wives transfer their spurious millions or offering me a breast implant - these unwelcome offers hardly presented to me in a socially responsible way.

But what does seem to have happened is that CSR has spawned into a myriad of items that fall within its wide embracing arms. So now I see articles as diverse as stakeholder consultation of companies in India, plus a whole host of related topics such as sustainability, corporate reporting, non-financial aspects of company reporting, assurance, etc. I have discussed elsewhere my concern that the conceptual basis for all these concepts is weak and yet corporates, themselves, tend to be cavalier in their response to concepts. This is surprising since they obviously are incredibly precise on the products they sell - one can hardly sell a mobile telephone, for instance, inside a spare tyre! Elsewhere, too, I have discussed my concern with the phrase 'Corporate Responsibility' mainly because I remember about a year ago President Bush parading in front of posters announcing Corporate Responsibility and none of us, as Paul Krugman's excellent Op-Ed columns in the New York Times will remind us just about every other day of the week, is sure that Bush has embraced corporate responsibility as those embracing CSR would do.  The the phrase corporate responsibility by the way gets a list of 3 million websites in Google. The social in CSR is what gives it its meaning, without 'social' in its gambit then corporate responsibility is a very good thing, but what does it mean?

The future?

So what about the future? I think that CSR will always be with us in some way or form although certainly not in the same clothes as before. There is no doubt that the word social in the credit line makes companies nervous and many prefer to use one of the terms expressed above. One of the problems with floating concepts is that no-one is ever sure whether companies are talking about the same sorts of things. We think we all know what is meant by profits, although Enron's shady accounting practices showed us that slight of hand is as popular as ever. So despite the reluctance of companies to use similar terms there will, I think, be a convergence on including most of the basic issues about CSR in company operations and company reporting. Concern from consumers about company products and how they are made, worries about globalisation and pressure on companies to behave decently from their new employees will matter more and more - I write this a week before the G8 summit near my home in Geneva which will undoubtedly lead, unfortunately, to violence in the name of something called anti-globalisation that is sure to hit the headlines. The astonishing number of German police - 800 at the last count plus Swiss ones - invited into Latin orientated and peaceful Geneva is an ominous sign.

That capitalism's scorecard is currently one and communism's is zero does not mean that people's social conscience will evaporate into more immediate concerns for their own self-interest. Selfishness will continue, of course, we see from the support that Bush gets from Midwest defenders of semi-automatic rifles for all or fundamentalist views turning against mass produced western goods and a subservient role for women. Indeed, as one of my close friends whose company monitors the oil business told me:

We pretty much have the view that Corporate Oil should more-or-less abandon CSR - it does not work, generates PR only, distorts the image of reality in the world oil game, and so on. Plus, in effect, it undermines Governments and lets them abandon national responsibilities. Bad for Governance writ large actually. For most players, this can never be but a fraction of capex and real critical investment.

Need for a planetary bargain

I believe he is wrong. CSR is much more than purely PR and must be part of future corporate governance and strategy issues more than ever before. My book The Planetary Bargain: CSR Matters (Earthscan, London and New York) provides a weight of evidence as to the increasing concerns with CSR as well as elaborating the concept and linking it to globalisation. I argue that 'to reverse the negative tendencies of increasing poverty and inequality, there is a need for a planetary bargain between the private and public sectors running across the world. In this bargain the public sector will help private organisms to operate with clear ground rules, and the private sector will pay more attention to longer-term social issues than ever before'. The 'bargain' will come as 'stakeholder pressure' will be society's invisible hand, guiding, suggesting, protesting, campaigning and regulating wilder excesses.  It will not occur by itself without vigorous actions or attempts to document and suggest alternative ways of conducting business. The socially responsible 'invisible hand' will have to be guided by the millions of concerned people who care about such things. Given that more and more enterprises see that such a course is in their long-term interest, the ground is fertile for this guidance to take place. (Michael Hopkins, The Planetary Bargain, Earthscan, London, 2003, p.43).

Four main issues for the future of CSR

Will:

1.Companies retain the idea of CSR?

2.CSR be legislated for?

3.CSR reports be PR reports only?

4.Investment in CSR rise?

For the first point, as argued above, companies will retain the ideas of CSR but not the concept as currently expressed. It will pass into interminable and dull discussions about non-financial assets and generate a new breed of intangible asset or corporate governance experts. Once the dullness sets and armies of specialists take over, you will know CSR and its grandsons and daughters have been taken on board.

Second, there will always be pieces of legislation that can be grouped together under a CSR heading and there is not much doubt that more legislation will thread its way into the statute books under different guises. But there will not be CSR bills or acts as such. But laws are not enough. For instance the ILO has eight fundamental conventions (also known as core labour standards) that have passed into 'international law'. But there is no police force interested in that law and many countries claim to have passed the law into their legislation but do not act upon it. For instance, we at MHCi have just finished an examination of one country who has ratified ILO core labour standards, which include two on child labour - minimum age of work and against hazardous labour. Yet, every autumn in that country most children in the rural areas, and some bussed in from the urban areas, are forced to work on the cotton harvest. The Government claims this is voluntary or family labour but actively connives to engage the children through its local government officials. Moreover, the Government's labour laws are outstanding and a model in the way they conform to the international standards!

On the third point above, there is no doubt that early reports from companies act as a PR function and have not become part of a companiesí ethos. As ACCA noted in their report on their UK awards for sustainability reporting in 2003, 'sustainability reporting is still evolving, and has some way to go before reaching the degree of sophistication that some stakeholders would like to see. The judges, however, were encouraged to see an increase in the number of reports entered'.

Fourth, financial analysts are agnostic, if not openly hostile, to the idea of social investment. They are not interested in social reports, believe that it is hard to make money with social investment which is, anyway, promoted by old-fashioned lefties, and are very skeptical of social investment indicators such as the KLD, FTSE4good, Dow Jones Sustainability and Jantsi Indices to name but a few.

Certainly, it is early days for social investment funds although there are increasing claims that social investment funds have been performing slightly better than overall share indices, but this could simply be because of recent poor performances in general. Clearly, investment analysts wish to see the 'business case' for social investment and are not carried by the 'moral case'. As we have shown in earlier MHCi 'monthly features', the business case for CSR investing is still under consideration although our model theorise gains (see J-CURVE ).

So it looks as if CSR is as popular as ever, certainly more than when I wrote the first edition of my book five years ago. Next steps are to define concepts clearly, devise indicators to measure progress, and monitor application and corporate benefits as well as costs. This agenda itself will put the critics of CSR on the back foot and, who knows, even my friend above might be converted!

[contributed by Michael Hopkins with thanks for comments from Jawahir Adam and Al Straughan]

Report of the Judges: 'ACCA UK Awards for Sustainability Reporting 2002', p. 6, Published by The Certified Accountants Educational Trust, London, March, 2003.

We hope that the quick overview above gives you either some new insight or food for thought on aspects of CSR. We examine these questions in more detail in our Geneva based courses . Please contact Please contact us for more details.