Articles

April 2009 Monthly Feature

The DEARTH [1] of Corporate Social Responsibility

By Michael Hopkins[2]

... a pure, stateless, market capitalism, a sort of international bourgeois anarchism...(or)  a planned socialism uncontaminated by private profit-seeking.  Both are bankrupt. The future, like the present and the past, belongs to mixed economies in which public and private are braided together in one way or another.

Eric Hobsbawm, The Guardian, London, April, 2009

Introduction

The responsibility of companies, corporations and institutions to their stakeholders is probably more important today than ever before. This is because the lack of responsibility in so many of our largest companies in recent years has thrown the whole issue of market freedom into question. Even the limited version of responsibility, beloved by Milton Friedman, where the only responsibility of companies is to their shareholders, has been undermined by the crash of shares, bonds, titles and, in some cases, the total loss of pension funds and savings from Wall Street to Iceland, and from Antigua to the City of London.

As our politicians and press speculate about the future model of our economies, and ‘more of the same, but better' remedies emanate from the April, 2009 G20 world leader's conference in London, where are we?. Should we follow either a socialist (aka communist) or a market (aka capitalist) agenda? Currently, a third way of responsibility with a mix of socialist and market principles is attractive as Eric Hobsbawm argues (cited above.)

Yet companies have lurched against responsibility as exemplified by their seeming move to embrace ‘corporate sustainability' or ‘corporate citizenship'. This is aided and abetted by the ‘think-tanks' of change such as the consultancy SustainAbility or The Global Reporting Initiative. If either embrace the tenets of strategic CSR[3] then perhaps we should worry less. But it does appear that those who embrace the last two ‘phrases' have lurched either toward more environmentalism (sustainability) or more community involvement either at home or abroad (citizenship).

Now there is nothing wrong with being concerned with either of the latter two issues. A strategic approach to CSR includes both of these as part of its overall systems approach. So has CSR been rejected too soon?

CSR rejected?

Curiously, the increased need for ‘responsibility' comes at a time of a perceived tiredness with the concept of CSR. The rush into CSR in the 1990s was led mainly by environmentalists who had seen a useful concept to use in a world that eagerly and continually searches for new concepts.  Further, when CSR is defined as 'treating the stakeholders of a company in an ethically responsible manner' it provides a powerful systems tool to managing a company.

But the problem with CSR has not been about what it means, when carefully defined, but the combination of words. Of course corporations are responsible, some would argue[4], because they could not otherwise survive - an irresponsible company would soon have its wings clipped. Many companies have had their wings clipped because of irresponsible behavior (Shell, Nike, Gap, Exxon, BP, Parmalat, Fanny Mae etc) and some have been disembowelled (Enron, Bear Sterns, Lehman Brothers, Worldcom etc).

Perhaps the problem is the word ‘social' as companies may believe that this means socialism through the backdoor? Clearly, on first sight, it seems to exclude economics and the environment. But then, do not Economics faculties in our main universities come under the heading of social science? And can we deal with environmental problems without their economic roots? Of course not!

I think we would all love a 'new' term that describes all that succinctly.  CSR has survived because it, as I define it[5], has concentrated minds on all key stakeholders and how they are treated by a company or entity. Yet, when people start saying goodbye to concepts without defining them, as many have done with CSR recently (eg the overly dramatic 'death' of CSR in The Financial Times and an earlier critical piece in The Economist, subsequently reversed) perhaps these concepts have more mileage left in them?  For instance, many have predicted the 'death' of GDP as a concept because the growth it purports to measure does not capture such things as 'intangible' assets, environmental protection and so on.

Companies, or at least some of them, are now delighted that new terms allow them to forget the stakeholder model that covers such knotty issues as corporate governance, employee layoffs, supply chain standards, customer concerns, corruption etc and allow them to concentrate on such things as 'corporate sustainability' (i.e. long-term environmental issues) or 'corporate responsibility' (which is what they do already).

A VP of Unilever, who looks after these issues, confirmed what I suspected: that many companies switched too quickly over to 'sustainability' issues and ignored the social and economic ones and he felt that a re-alignment towards 'social responsibility' was sorely needed[6].

A truly independent and forward thinking advisory company, such as MHCi, can best serve companies by not being a slave to them and giving them a 'get out of jail for free' card, but to help them honestly and critically to deal with all their stakeholders so that the 'responsibility' crisis of the present, and the future, can be avoided and their reputation and business model be reinforced.

Evidence

Corporate & Social Responsibility is part of the fabric of our business - it informs, influences and drives our operations and our commitment to the well being of the world. We see our responsibility falling into two categories: we have a ‘sphere of control' where we can ensure that we run our operations in the safest and most responsible way we can; there is also a ‘sphere of influence' where we seek to take a lead in key areas, such as climate change and development, to enable change and help achieve a positive outcome.

www.bp.com

Corporate social responsibility (CSR) is generally considered conducting business activities in a responsible manner. At General Motors, CSR is the attempt to balance environmental and social aspects of our business with the economic aspects of our business.

www.gm.com

Table: Largest Ten Corporations in Fortune 500 (2008 Revenues)

Company Dominant Concept Used Items on ‘CSR' from Search
Wal-Mart Sustainability 0
Exxon-Mobil Corporate Citizenship 0
RoyalDutch Shell Responsible&Energy, Sustainability 0 after 2006
BP CSR 25
Toyota None in particular 3
Chevron Corporate Responsibility 0 after 2006
ING Group Corporate Responsibility 0 after 2004
Total Environment & Society 19
General Motors Environment&Social Responsibility 20
Conoco Phillips Social Responsibility 4

So much for theory. If we look at the websites of the ten largest corporations in the Fortune 500 list, what do we find? Surprisingly, as the table above illustrates, ‘sustainability' did not appear as often as one might have expected nor did ‘corporate citizenship'. The term ‘responsibility' appeared in five out of the ten, and ‘social' responsibility in three out of the ten. A headline writer might well capitalise ‘CSR still dominant term in 30% of world's largest corporations'!or, even better to support my case ‘CSR not dead as 50% of top corporations focus on their ‘responsibilities'. Alternatively we might also get ‘No mention of CSR in 50% of top corporate websites', depending on the orientation of the imaginary journal

What are we to believe?

Does this mean that CSR is ‘dead' or that we are now moving into ‘Beyond CSR' or ‘CSR 2.0' as some commentators would have us believe? Anti CSR editors and those burying CSR might be tempted to take the catchier soundbite in that part of today's negative world where it is easier to dispose than propose and announce the ‘End of CSR': they might be advised to take a look at the evidence and note that there is still life in the concept.

Some commentators are trying to return us to the hopelessly out-of-date Milton Friedman view of business but the conclusion remains, that social responsibility has been, is and will continue to be crucial to the future prosperity and integrity of our businesses[7].

Can, therefore, we call it what we like but still mean a robust strategic and systems approach to social responsibility? Perhaps a better expression will surface but so far none of the contenders - sustainability, citizenship, business and society, ethical business - have stuck long enough to focus minds. CSR is not dead, simply there is a ‘DEARTH of CSR'!


[1] deficiency, lack - the state of needing something that is absent or unavailable; "there is a serious lack of insight into the problem"

[2] www.mhcinternational.com

[3] Strategic CSR consists of the principles, processes and products that cover treating the key stakeholders of a corporate body in a responsible manner. The aim is to behave as responsibly as possible while preserving the profitability or survival of the corporate body. This is covered in detail in my book The Planetary Bargain: CSR Matters (Earthscan, London, 2003)

[4] E.g. Bo Ekman of the Tallberg Foundation, personal communication, April 3 2009

[5] See www.mhcinternational.com

[6] Private communication April 9th 2009

[7] See also Corporate Sustainability, Citizenship and Social Responsibility Reporting: A Website Study of 100 Model Corporations, Karen Paul, Department of Management and International Business, Florida International University, USA Journal of Corporate Citizenship, http://www.greenleaf-publishing.com/greenleaf/abstractpopup.kmod?productid=2887. In her study of the websites of the Global 100 Most Sustainable Corporations twelve terms and concepts relating to sustainability, corporate citizenship and corporate social responsibility were identified as differentiating concepts. ‘Social responsibility' was the term most frequently used as a primary term visible on the corporate website, but considering all terms observed regardless of order, ‘sustainability' was the term most frequently used. Thanks to Ian Doyle for drawing my attention to this article.