Mariel Chavez
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Quick! Pretend We’re Nice! The Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship Mariel Chavez Adam Smith is an economist made famous by his invisible hand metaphor -- selfinterest ultimately leads to greater public welfare. In other words, the pursuit of profit for any private enterprise benefits everyone else. This pursuit of wealth, by the nature of any firm, will always come first; the bottom line will always come first. When a profit-seeking entity then pursues the selfless (and costly) act of Corporate Social Responsibility, which according to the European Commission is ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’, you should worry about where their interest truly lies. When faced with the decision between profits and social benefit, I would argue that the shareholders will always be chosen over the stakeholders, and whether CSR truly provides any tangible benefit to society, is still questionable. I would then argue that there is a need to look after these companies’ actions, in that they pursue and tout Corporate Social Responsibility dutifully.
One thing about CSR is that it is open to interpretation and thus, comes in many forms: McDonald’s showcases the social purpose it espouses mainly through its Ronald McDonald House Charities; The Body Shop is known for championing animal rights by not conducting animal testing on their products; Shell Corporation has a comprehensive CSR program that ranges from women’s advancement and education to investments in renewable energy. It is interesting to find out that each of these firms dealt with some bad publicity: McDonald’s has had countless of cases filed against it from food poisoning to alleged responsibility for the obesity of most Americans; The Body Shop has been accused of releasing erroneous figures for its charitable contributions and fabricating the organic claim of its products; and Shell has violated the Clean Air Act according to the Environmental Protection Agency (EPA) of the United States. Efforts from these corporations might be respectable but, are they truly acts of compassion or merely good press to advertise and repackage the brand name?
At first glance, it does not make sense for any company to buy into CSR. CSR means one thing in the balance sheet: money coming out of the company, a cost to the firm. So why
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is everyone jumping into the CSR bandwagon? Perhaps to gain a competitive advantage through distinguishing a label by the causes it supports. CSR launders soiled names and convinces employees and investors alike of an image of a principled business. Nobody wants to buy from a company that “destroys the earth” and portraying the company as an ethical one saves it the hassle of public scrutiny and worse, press inquiry.
Any company would
voluntarily give back to the environment and community if the rewards are as copious as what CSR can offer! Doesn’t it make you feel better to buy petrol products, the bread and butter of petrol companies, when you know that they too try to invest in eco-technologies? However, the problem arises when the companies play the values of people and do not deliver - a betrayal of public trust. A company’s loyalty lies in its shareholders. That is how it was then and that is how it will be. When Shell allotted an estimated $1 billion dollar investment in renewable energy between 2001 and 2005, there is great doubt whether they did it solely out of the kindness of their hearts. Shell, along with other petrol companies, joined forces in marketing their alternative fuels with a £5 billion budget for a 3-year ad campaign, the largest spent for advertising to date. Today, Shell enjoys the reputation of a responsible corporation while continuing to exhume the Earth’s fossil fuels, which is a long way from the sustainable development that CSR champions. All that while benefitting from tax cuts from the bigwigs and dignitaries. Had these companies intended CSR for the sole purpose of benevolence, shouldn’t they have at least spent more on the CSR programs than they did on boasting their causes? Yet, it can’t be too surprising that they publicize their works fervently: revenue is what their shareholders want and please the shareholders, they shall. Some argue that at the very least, CSR is the lesser of two evils. A company that does a little good, no matter whether they gain more from doing so, is better than a company that does not do anything at all. The problem is, apart from ruining the supposed good behind the concept of CSR, companies that hide behind the pretense of social responsibility damage the purpose and therefore, the success of social entrepreneurs, non-government organizations (NGOs) and pro-bono firms that actually care. These individuals and groups thrive mainly through the support they obtain and the attention they engender. They are kept alive through donors and volunteers who support their causes. They need to maintain their clout in the society through the popular votes of the people. This is their way to get involved and be heard. The last thing that we should do is to drown their voices with false compassion and sham grandstanding from profiteering companies.
What is then left of these social
entrepreneurs and groups when their voices are crowded out?
Take the Sierra Club, a 2
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stringent environmentalist group that is known to sue companies that infringe green laws, which endorsed the “ecological” line of products from Clorox Co. While it may have helped the image of Clorox, it undermined the reputation of Sierra Club, which thrives through hardline environmentalists who felt that what happened was a sellout, a betrayal of what their group stands for. Nevertheless, to discredit or to impose CSR through strict legislation is tantamount to impeding the good that is always possible or forcing a set of morals that is supposedly value judgment. This is why there is no blanket policy that entirely dictates to corporations how to practice CSR. Truly, it is propelled by the greater impetus of sustainable development, which, though not entirely on corporations’ hands, could be more easily attained through their cooperation.
The entire negative connotation attached to CSR is caused by the lack of checks and balances.
Nothing guarantees that a corporation has to deliver, which allows them to
manipulate the concept of CSR to their advantage. The solution to avoid such exploitation is to establish a watchdog organization that could guarantee the public of the genuine intent in a company’s actions and in turn, put credibility to the CSR of a company. Through such a supervisory body, brands and groups that are truly interested in engaging in CSR are sifted from those whose intent is to mislead. This then protects public trust as the interests of all parties involved are likewise safeguarded. Through proper management, the problem of freeriding from CSR can be removed.
The creation of such a watchdog agency is not atypical. A great example is the Better Business Bureau (BBB), which is composed of a network of organizations that promotes a fair market to “Start With Trust”. They helped build the credibility of online e-commerce sites, which today have burgeoned into a juggernaut of an industry. The same could be done for CSR where the vigilant public could confirm the validity of company actions, monitor employee welfare standards and ensure transparency in the claims made by the business firms. In turn, firms that perform CSR responsibly enjoy a reputation that the people can believe in. Through a body that can differentiate CSR from customary good acts, the pressure on companies to do something they are not required to is removed and the control of other advocacy groups to pressure companies to abide by their beliefs and own set of morals is eliminated. Undertakings ranging from CSR news dissemination to acting as intermediaries in 3
Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship
Mariel Chavez
moot issues would be under this watchdog group. To be able to deal with issues that vary in every region and to be able to reach out to smaller firms, local boards, which act as branches of the international watchdog body may be formed. Their guidance should not be confined to CSR alone but could also be open to social entrepreneurs, who may face similar issues in their charity foundations and philanthropy. Through a higher organization, social entrepreneurs will be given another perspective in dealing with their endeavors so as to prevent being blind sighted by their objectives. Being a completely independent body, it can help advocate the proper legislations that companies will be constrained by, therefore becoming a beacon to the government itself. Further, it can act as a regulatory body that can assist companies and social entrepreneurs so that they will not be sidetracked from their business goals and thus simultaneously maintain a lucrative enterprise.
This is vital because good finances are
essential in having an effective CSR program. Moreover, its presence reinforces conscientious business management which, in time, creates more reliable institutions.
Through public
confidence and governmental support, an overseer body can be the key to CSR’s success as it provides a united front to what is now a bewildered state of Corporate Social Responsibility, social entrepreneurship and what they entail.
Ideally, businesses with good CSR practices gain the trust of the public and its employees. Efforts to save the environment through recycling product packaging or using more efficient production processes ultimately helps the firm save on costs, which allows them to have a leverage from the competition by being able to sell the product at a lower price. Unfortunately, the ideal outcome of CSR is often not the case. Taking Shell Corporation as the tieback example, Shell promotes environmental initiatives to repair its image as a brand that destroys Mother Earth. It still provides us the means to clog our atmosphere with billions of tons of greenhouse gases every year as they exploit poor nations for oil because that is where their shareholders’ funds take them. When the economy had a jarring blow, Shell ceased research on most alternative energy sources, citing it as not ‘profitable’.
The truth is CSR will only be done if it profits a company. When the money stops flowing, CSR will be the first to go. All the while, we are filled with the delusion that these companies have done good and that they are a good force in the world. And as we admire the tricks of these giants, we forget the smaller groups that truly care, that genuinely hope to change the world. If companies like Shell want to say that they care and that they want to move the future of energy forward, then they better put their money where their mouth is. 4
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Bibliography: Article 13. “Sustainability reporting – demonstrating the value of sustainability efforts”. http://www.article13.com/A13_ContentList.asp?strCategory=Expert%20View (Feb 2009) Solomon, M. “Could corporate Social Responsibility destroy social business?” Social Enterprise. http://www.socialenterprisemag.co.uk/sem/tradingplace/detail/index.asp?id=355. (26 Feb 2008) Mair, J. and Marti, I. “How Should We Study Social Entrepreneurship?” IESE Business School. http://insight.iese.edu/doc.aspx?id=341&ar=6&idioma=2. (2004) Social Return on Investment, a social entrepreneurship blog. http://www.socialroi.com/socially-responsible-business-models.html. Maitland, A. (2002). "McDonald’s responds to anti-capitalist grilling". Financial Times (UK). No.15 April. pp.13 Entine, J. “The Queen of Bubble Bath”. Brazzil Magazine. Cover section. http://www.brazzil.com/p19dec96.htm. Dec 96. p. 19. Flesher, J. “Sierra Club, Clorox Deal Sparks Feud”. Manufacturing.net. http://www.manufacturing.net/News-Sierra-Club-Clorox-Deal-Sparks-Feud.aspx?menuid. (16 Jul 2008) Arnold, C. “Shell, BP, Esso combine to launch new environmental ‘A Fuel’ with record £5bn budget. Brand Republic. http://community.brandrepublic.com/blogs/arnold_on_ethical_marketing/archive/2008/04/01/s hell-bp-and-esso-combine-to-launch-new-environmental-a-fuel-with-record-5bn-budget.aspx. (01 Apr 2008) Better Business Bureau. “Vision, Mission and Values”. http://www.bbb.org/us/mission-andvalues/. European Commission. “Corporate Social Responsibility”. Enterprise and Industry. http://ec.europa.eu/enterprise/csr/index_en.htm. Pagnamenta, R. “Anger as Shell reduces renewables investment”. Times Online, Energy and Environment section. http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article59278 69.ece. (19 Mar 2009) Davies, S. “Corporate Social Responsibility in The Economist”. PRBlogger. http://www.prblogger.com/2008/01/corporate-social-responsibility-in-the-economist/. (21 Jan 2009). B Net. “EPA slams BP, Shell, Motiva and Equilon for Gasoline Violations”. Energy Industry, Octane Week. http://findarticles.com/p/articles/mi_hb5981/is_200610/ai_n24160581?tag=content-inner;col1. (Oct 2006)
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Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship
Mariel Chavez
Global Initiatives Symposium in Taiwan 2009