Is Corporate Social Responsibility A Myth?
(Oct. 10, 2005) A new article in the Stanford Social Innovation Review argues that the public is being misled by the corporate social responsibility (CSR) movement.
In the Fall 2005 issue, author Deborah Doane lays out four myths about CSR that have permeated the public consciousness but do not always hold true:
- The market can deliver both short-term financial returns and long-term social benefits.
- The ethical consumer will drive change.
- There will be a competitive 'race to the top' over ethics among businesses.
- In the global economy, countries will compete to have the best ethical practices.
Doane, a writer about CSR and chair of the CORE (Corporate Responsibility) Coalition, argues that despite some superficial changes--more companies issuing social and environmental reports, increased charity-corporation partnerships--CSR has had very little impact in altering corporate behavior. This is primarily because the core principle behind CSR, that business outcomes and social objectives can become more or less aligned, is often faulty, especially when pressure is placed upon a company to drive up profits. She notes that there is little evidence that many CSR activities (giving to charities, protecting natural resources, etc.) actually improve the bottom line. Thus, when push comes to shove, CRS funding and activities lose out.
What CSR does do, according to the author, is allow companies to effectively ward off potential public relations controversies and social activists by pointing to their philanthropic and social responsibility activities. Doane is especially critical of the increasing number of business ethics awards that are now being distributed, even as some companies who are honored ignore standards and barely change their behavior.
Not Just the Corporations' Fault
Doane asserts that the public is at fault as well. Despite increasing public concerns about environmental and social issues, most studies continue to show that very few individuals act on their concerns. Roper ASW, an international market research and consulting firm, has tracked consumer environmental attitudes and categorizes consumers into five categories, from 'True-Blue Green' (those persons most likely to act on their concerns) and 'Basic Browns' (people who do not believe individual actions can make a difference).
Only 9 percent of the population is 'True-Blue Green,' while a third are 'Basic Browns.' This pattern has changed little over the past 15 years.
Doane points to three possible alternatives that can have more impact on corporate social activity than current CSR strategies:
- The first strategy is the creation of regulations from Congress or other legislative bodies that would require corporations to act in socially responsible ways.
- A second strategy would require more social labeling by corporations, increasing the information available to the consumer about products and creating ratings systems to capture efficiency, impact on the environment, etc.
- A third strategy that would have a more profound impact on corporations is to change the legal structure of the corporation. For example, in England, a group of nonprofit organizations is developing legislation that would increase the legal responsibility of company directors to include not just care of shareholders, but also care of the community, employees and the environment. In the United States, an initiative has been created to develop a set of social responsibility principles that would be embedded in the founding of a company.
The initiative, Corporation 20/20, was developed by Business Ethics and the Tellus Institute. The draft principles include:
- The purpose of the corporation is to harness private interests in service of the public interest.
- Corporations shall accrue fair profits for shareholders, but not at the expense of the legitimate interests of other stakeholders.
- Corporations shall operate sustainably, helping to meet the needs of the present generation without compromising the ability of future generations to meet theirs.
- Corporations shall distribute their wealth equitably among those who contribute to its creation.
- Corporations shall be governed in a manner that is participatory, transparent, and accountable.
For more information, see the Corporation 20/20 website.
The full text of the article is available on the Stanford Social Innovation Review website.
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