Corporate social responsibility: options not included

Having grown up in the 1990s I have watched the term ‘corporate social responsibility’ (CSR) grow and evolve. Whilst the anti-sweatshop movement of that decade may have marked the real beginning of an era of increasing concern for social causes[1] today, CSR has come to cover three kinds of responsibility: economic, environmental and social[2], covering issues of the workplace, human rights, the community and the marketplace.

Last week I attended a breakfast briefing with the UK Government Department of Business, Innovation and Skills (BIS) on the current call for views around CSR and what government, business and others can do in order to realise its full benefits. A big issue for all businesses in the UK, one would imagine that BIS are being swamped with replies from different stakeholders voicing their opinions on this highly topical, heavily publicised, issue. Yet, we were informed that responses to date have been few.

Surprised by this, I got thinking about the growing disconnect that continues to embody CSR: its existence is considered mandatory, yet its implementation appears optional. As such, this piecemeal application results in the overarching appearance of CSR as being ‘fluffy’, with financially debatable outcomes.

Firstly, despite its popularity, CSR is still thought of, by many, as ‘soft’, ‘left-wing’, at best ‘optional’, at worst done ‘for the sake of appearances’. This has been repeatedly shown by surveys that demonstrate that even where companies spend millions on CSR activities, consumers are sceptical of their intentions and believe a respective type of ‘green washing’ is at work. As the 2012 RepTrak 100 study shows us, despite being the top 100 companies in terms of CSR efforts, 4% of consumers believe they are ‘absolutely not to be trusted’ and a huge 60% aren’t sure. Indeed, only 6% of consumers considered these companies to be acting as strong and good corporate citizens.[3] This has, as Kasper Nielsen from the Reputation Institute explains, left many believing CSR is dead, and that from a reputational improvement point of view, it simply doesn’t work.

Secondly, the entire premise on which CSR stands has been overtaken by the argument on whether or not it can be linked to financial value and a return on investment for the company involved. Pinpointing the financial value of CSR continues to be the overriding issue amongst economists, businessmen and philanthropists, and there appears to be no one answer. The expectation that companies can profit by serving the greater social good is being scrutinised down to the last penny. The view proclaimed by Milton Friedman in 1970 that companies undertaking CSR initiatives do so to the detriment of shareholder value, is still shared by many. In fact, it has recently been argued that whilst CSR expenditures typically destroy shareholder value, when it does add value, it does so because that very CSR expenditure is seen as a precursor to future financial performance.[4] “To put it simply, CSR is what “rich” companies do!”[5] This viewpoint is further exhausted by the confusion that many have in distinguishing between CSR, philanthropy, environmental disclosure and sustainability.

However, expectations in both the B2C and B2B market have changed so much that corporations are now essentially required to adopt corporate social responsibility programmes to remain viable, the rhetoric and actions on CSR should go beyond the fluff and the financial impact, and rather focus on how to ensure that it is integrated across the supply business chain.

Corporate responsibility is something, whilst not regulated, that all companies should practice and be in line with in the same way that they would comply with operations to licence and regulatory infrastructure. Corporate responsibility is not option. In today’s world, driven by high consumer expectations, being responsible from sourcing to supply chain to social engagement is a given. Finding the most sustainable way to do this is what the debate should now focus on.

It is easy to see why many feel that with regards to CSR, they are in a lose-lose situation in the eyes of their consumers and/or investors. In an environment which is financially challenging – where many companies may feel intimidated and financially ill-equipped to undertake and invest fully in CSR - the easy option is to apply it as a charitable add-on, a narrowly defined marketing function segregated from the rest of the business[6]. However, this is the very action of ‘showing’, as opposed to ‘doing’, that blights CSR and positions it as a ‘fluffy’, financially fruitless, undertaking.

Thankfully though, help does appear to be on the way and I think it is great to see that the government are calling for these views and best practice examples on corporate responsibility. Hopefully, by engaging with a wider audience, including leading companies that succeed and profit from CSR (because they apply the same rigor on it as they do other core business priorities[7]), this call for views can bring about significant key learning’s for everyone on the benefits of corporate responsibility. Indeed, I think this call marks an evolution in the CSR debate. Corporate responsibility these days is about finding solutions that benefit society and the company itself, collaboration among interested parties in the quest to learn from each other, being smart with the budget available, and learning from best practice in order to ensure sustainable thorough implementation. By companies communicating what they have done and what this means for society and their long term profitability, the image of CSR is going to shift towards a closed loop strategy which delivers added value and underpins this shift from philanthropy/doing-good to sustainable business practices.

The consultation closes on the 27th September 2013 and can be found here.