Two Problems With CSR

There’s plenty of confusion about what CSR is. Indeed most of the definitions you’ll find online don’t even read like definitions. They’ll tell you what CSR (Corporate Social Responsibility) is “about,” or what it “relates to,” but they won’t tell you what it is. Any definition worth its salt ought to take the words in the term seriously, and note that the term “CSR” refers to some kind of responsibility, and then explain just what kind of responsibility it is. But good luck finding such a definition. And this failure of definition isn’t just a matter of semantics. It’s critically important, because a sloppy understanding of the term gives the appearance of unifying under a single banner people who actually hold vastly different views of what a corporation’s responsibilities are.

Various definitions out there seem to coalesce around the idea that business should be “giving back” to the community — and typically not via antiquated methods like corporate philanthropy. The goal, generally, is to make sure that a company’s net impact on society is positive. Let’s take that as our point of departure.

The following two problems form the Scylla and Charybdis of CSR. If you avoid one, you run right into the other. Both spell doom.

Problem #1: CSR is too easy, if taken literally. If all that’s at stake is making sure your net impact is positive, wow, that’s pretty easy: just sell a decent product that people want, and don’t hurt any bystanders. It’s a fundamental principle of commerce. Start with individual transactions. Those, if voluntary and well-informed, always have a positive impact. A customer gives you $1.00, and you give them a pound of bananas. They’re happy, and you’re happy. Don’t step on any bystanders’ toes, and there you go: positive net impact. In fact, as long as your customers are happy enough, you can afford to hurt people along the way (e.g., by mistreating employee) and your net impact will still be positive. (And of course, claiming to adhere to CSR is even easier if you use a mushier definition, one that only asks that you “manage” your social impact, rather than aiming at any particular objective.)

Problem #2: On the other hand, CSR is unfairly burdensome, if really taken to heart — that is, if you really think that the pursuit of social contribution ought to take over a manager’s entire way of thinking. It means that a company that makes a good product, treats employees well, deals fairly with suppliers, etc., still has to ask itself, “yes, but how are we giving back to the community?” Look in the mirror. What’s your net impact on society? What good are you — other than the fact that you put in an honest day’s work, take care of your kids, and given a few bucks to charity now and then? (Hint: that’s a rhetorical question.) The joint-stock corporation, on the other hand, is arguably one of the most welfare-enhancing inventions of all time. For such organizations, failure to have a positive impact is the exception, rather than the rule. Asking one to risk its productivity by obsessing over something it’s already doing is silly.

Now, there’s absolutely nothing wrong with the idea that companies are responsible for their behaviour (and that the individuals who work for companies are responsible for their behaviour, too). And for some people, that’s all that CSR means. That’s just fine. In fact, such responsibility is absolutely morally fundamental. Companies should try to make an honest living, just like individuals like you do. They should avoid hurting people, just like you do. They should clean up their messes, just like you do. That’s basic ethics. And if they’re doing those things, calling it something as mushy as “CSR” adds absolutely nothing to the equation.

6 comments so far

  1. jayar on

    If it is the question of CSR not being defined yet, I must restate yes, it has not been, same as Business Ethics, Corporate Governance, Corporate Sustainability. These jargon come in for a few years and then disappears. KPMG EIU a Global Survey conducted recently on Corporate Social Responsibility – A Progress Report – of 378 Senior Executives, encompassing a range of industries has concluded, “Deciding how to measure is more difficult than what to measure’.

    This is the result of not able to define the term rather than the term is not defined. This lacuna continues from 1995 when IAS 38 Intangible Assets was left without ‘intangible’ being defined. It has been so left undefined because the word ‘intangible’ one is not able to define.

    With respect to Corporate Social Responsibility I should greatly appreciate your study of these three documents that I had analyzed.

    i. Corporate Social Responsibility CSR 2.0 [http://bit.ly/fQGN0n]

    ii. Harmonizing #CSR and #Sustainability [http://bit.ly/fphK5c]

    iii. #CSR the biggest and most dynamic corporate function of 21st Century [http://bit.ly/koitl2]

    The last one [iii] gives the clear space for Corporate Social Responsibility described as a Modem, that may sufficiently address your query above.

    Thanks

    • Chris MacDonald on

      Jayar:

      Actually, the term “business ethics” is pretty readily defined, and without much controversy. See this blog entry:

      http://businessethicsblog.com/2010/03/21/ethics-definition/

      As for the blog entries you’ve pointed to: it would be much more useful if you would do us the favour of pointing out where in those 3 long entries you respond to any of the concerns I’ve expressed above.

      Thanks,
      Chris.

  2. jayar on

    Chris

    The definition of Ethics and Business Ethics, is good. Can we make it universal? For example, we have UNGC 10 Principles that constitute Business Ethics with 4 issue areas – Human Rights, Labor Rights, Environmental Rights and Anti-corruption. The 10th Principle Anti-corruption is the most elaborate analysis accepted by 140 countries and ratified by 90 countries under a treaty UNCAC – United nations Convention Against Corruption.

    I advocate a similar document by Articles and Clauses to the first 9 principles of 3 issue areas. These 4 issue areas collectively would encompass all that we could define and categorize as Business Ethics. If there is one that cannot fit into these 4 issue areas beyond the definition of UNGC identified as Business Ethics, then we could create the 11th principle under the same canopy UNGC.

    As you have rightly pointed out – Ethics is structured – I am clamoring for the first 9 principles of UNGC in a structured format, in the same manner as UNCAC. I come across brilliant articles on Business Ethics, including yours and from Jack Marshall of Ethics Alarms on a daily basis. If only we could organize under one accepted structure globally such as UNGC by article and clause, then all these day-to-day reported events could be classified and rated so as to pinpoint the areas of achievement as well as the shortfalls. A database so created will give a challenging information by companies or by areas such as New York or Washington. Good articles come and go by without being made use of, for measuring and rating companies or organizations.

    I find the same problem in CSR & Sustainability reporting system where each expert such as KPMG or Deloitte or CR 100 Best companies 2011 etc. bring about disparate information without a standard reporting base. It is like Deloitte, PWC and KPMG having their own Auditing Standards without GAAP or IFRS or IASB defining standards globally.

    I have been advocating for this purpose establishing International Ethical Standards Board in the same fashion as IASB. Your interest, initiative and leadership will go a long way to bring about a consensus and harmonization of Ethical Standards.

    Problem #1 and Problem #2 I have addressed as I said in the noted blogs at length, including the GRI – Financial Times meeting where Business Leaders critically looked at the CSR in particular. When time permits please do have a look at the write-up that we can take it up further.

    I appreciate your response.

    Thanks

    jayar

  3. […] complained ad nauseum about the fact that there’s no clear, agreed-upon definition of CSR (Corporate Social Responsibility). Many definitions say something about “social contribution” or “giving back to […]

  4. tito Salgarella on

    One of the problems of Corporacions is the GREED of CEO , in those MILLONAIRS SALARIES , Pensions , benefits ! without control !

  5. Miguel on

    CSR is the excellent management of an organization in the economic, social and environmental issues, both internally and externally, from an ethical perspective and the principles of voluntary participation and transparency. I think this is a good definition.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 1,618 other followers

%d bloggers like this: