Business Should Stick to Business

Editor's Note: Point Counterpoint articles provide alternative views of topics. This article is in response to a December post on Corporate Social Responsibility and specifically to an article mentioned from the Harvard Business Review, "The Link Between Competitive Advantage and Corporate Social Responsibility" (see footnote 2).  The question raised is Corporate Social Responsibility just so much fluff and Should Business Stick to Business?

Business Should Stick to Business

by Alis Valencia

Corporate Social Responsibility (CSR) has arrived.¹ Once pursued by companies at the fringes of the corporate world, it now receives the attention of executives from corporations worldwide. Look beneath the public relations fluff and you may find substantive contributions designed to meet an array of important social and environmental problems. Huzzahs are called for, plaudits distributed. But is CSR good for people and nations?

On a superficial level, yes. Otherwise, no. Although CSR has unquestionable benefits, there need be no relation between social or environmental needs and a corporation’s CSR strategy. Moreover, both society and the environment would benefit more if corporations abandoned the notion of CSR and instead focused on gaining integrity.

What’s wrong with CSR? From a business perspective, CSR is rarely integrated with corporate strategy. From a social perspective, CSR serves various needs but none wholly.

In their recent Harvard Business Review article, Michael Porter and Mark Kramer distill three ways companies can do well by doing good: They can meet social and environmental needs with new products and services; model social responsibility through their business operations; and contribute money and expertise to society in ways that also benefit the business.²

At first glance, these approaches to CSR seem eminently sensible. To approach CSR from a strategic, income-producing orientation reduces the role that personal whim or bias may play and keeps the focus on business. To model social responsibility is another plus, a demonstration of walking the talk. In neither case, however, are we really dealing with social responsibility; both are simply smart business practices.

That leaves Porter and Kramer’s third category of strategically integrated CSR, to invest in the development of an area’s social and economic infrastructure so that company needs can be met. There is no question that such practices by Nestlé, Unilever, Philips Electronics, and other corporations are significant aids to development. Like nonstrategic CSR initiatives, however, these practices produce haphazard, uneven results because business imperatives, not social or environmental needs, drive CSR-related decisions. Worldwide, small pockets of society benefit in multifarious ways, but the rest of society is not helped.

In such circumstances, companies are undertaking a role traditionally filled by government, though on a limited scale. Is this good? Is stepping into the breach to facilitate the operations of a company, and coincidentally benefit pockets of society, the way to meet public needs? Or should we figure out why government fails to meet these needs and make changes to strengthen its capacity to do so?

When we do this we find an inherent flaw in CSR.

We know that corruption, nondemocratic practices, and lack of public funds keep a government from meeting societal needs. We also know that corporate practices contribute significantly to these circumstances. Here in the United States, we see how the revolving doors between corporate suites and government agencies lead to delays in setting regulations and to poor regulatory enforcement. Corporate contributions to election campaigns assure open doors in Congress and state legislatures. Lobbyists are more numerous than ever and play a direct role in writing legislation favorable to their clients. Then too, companies routinely seek subsidies and tax relief, pursue strategies to minimize taxable income, and negotiate reduced fines for illegal acts—and so rob governments’ coffers.

To take from society with one hand and then to give back (much less) with the other through CSR practices is a fine expression of hypocrisy. So too are the contradictions found among the practices of most companies that have adopted CSR in one form or another.

Wal-Mart, for example, even though late to climb on the CSR bandwagon, exemplifies the mixed signals that rebut corporate claims to social and environmental responsibility: The company has committed to reducing energy use and packaging, to recycling plastic, and to selling organic foods and buying organic cotton, but by contrast, the company continues its strategy to minimize labor costs through low wages, part-time jobs, suppliers’ use of sweatshop labor, a flexible staffing program that leaves employees with irregular and unpredictable work hours, and a health plan used by fewer than 50% of qualified employees.

Indeed, it is not as if corporate leaders are anxious to pursue CSR: A 2006 McKinsey Global Survey reported that only 8% champion social or environmental causes out of “genuine concern,” while almost 90% are motivated by public relations or profitability or a mix of concern and business benefits.³

Corporate leaders can pursue an alternative to CSR, one that allows business to stay focused on business, yet benefit society and the environment as well: the Pursuit of Integrity (POI).

When a company strives to have all of its practices consistent with one another and also designed to avoid harming society or the environment, it is engaged in POI. When it takes responsibility for removing the harms it has caused and meets or exceeds regulatory standards, it is engaged in POI. When it responds to a changing environment by aggressively seeking new business opportunities instead of trying to hold on to what it has, it is engaged in POI. When it considers employees a valuable asset and treats them accordingly, it is engaged in POI.

When a company engages in POI, it is increasing the likelihood of continued success.

Many companies use their accounting of CSR practices to pat themselves on the back for doing what they should be doing anyway in response to changing social and environmental circumstances. Why not take a vow of integrity and lead the institution of business away from profit mongering and toward a genuine practice of doing well by doing good?

 

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¹ For ease of expression I use CSR as an umbrella term to cover socially and environmentally beneficial, as well as sustainable, practices.

² “The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review, Dec. 2006.

³ “The McKinsey Global Survey of Business Executives: Business and Society.” January 2006.

Alis Valencia (avalencia@mcn.org) has served as editor of Consulting to Management (C2M) and of At Work: Creating a More Enlightened World of Business and Work.

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