Anyone for Social Responsibility?
By Bernice Hurst, Contributing Editor, RetailWire
Take two
professors from the University of Michigan’s Ross School of Business, strategist
Aneel Karnani and Tom Lyon, an expert on sustainable science and director of
the Erb Institute for Global Sustainable Enterprise, toss them a juicy question
and listen to the different viewpoints. The question concerns companies’ responsibility
to act in the public interest and whether they can profit from it. Their debate,
as reported on the University of Michigan’s website, revealed both agreements
and disagreements.
Early on, Professor Karnani said, “In my view, CSR
(corporate social responsibility) is either irrelevant or ineffective and dangerous.”
Expanding, he conceded that profits and social welfare can be simultaneously
increased “where the interest of the company and … society are aligned.” But
when they diverge, “it’s not realistic to expect companies, who have
a fiduciary responsibility to their shareholders, to sacrifice profits for
the sake of social welfare.”
Across the divide, Prof. Lyon defined CSR
as “corporate actions that
go beyond compliance with the law,” demonstrating how “companies
do well by doing good.”
Concerns about greenwashing and transparency were
points of agreement, especially where lobbying is concerned. Prof. Karnani
pronounced CSR “dangerous” because
it allows companies to make promises and seem to be responsible, but without
any compulsion to fulfil those promises. In other words, CSR encourages “greenwashing.”
Agreeing
greenwashing “is a serious concern and quite a lot of CSR initiatives
are shallow,” Prof. Lyon emphasized the importance of ensuring that “what
corporations say and what they do are actually consistent with one another.”
Government’s
role is one strong point of disagreement. Prof. Karnani believes there is reason
to try and improve government rather than pressuring business, which “should
not be able to play a political role, period.”Â
Prof. Lyon, while not expecting companies to respond to being politely asked
“to do the right thing,” added, “the distinctions between these things
are eroding even as we speak and the boundaries between politics and markets
are very hard to find.”
Through it all, points of agreement, specific
examples, talk of sticks, carrots and enforcement as well as acknowledgment
that rhetoric plays a strong role in the debate, failed to resolve their differences.
Which is why, perhaps, the debate continues.
Discussion Questions: To what degree is CSR (corporate social responsibility)
an oxymoron for most companies? What’s the likelihood that many CSR promises
will ultimately be broken due to corporate fiduciary duties?
Its hard for a corporation to be socially responsible because their first priority is to make money. So promises are usually just talk. It’s the corporation’s responsibility to make promises and break them. Fiduciary promises come before social promises. Otherwise we would have expensive food, fuel, and probably no Walmart. I always want to roll my eyes when a discussion starts out “two professors.” It’s not going end well.
The more important question may be whether CSR should be an important facet of a company. I’m willing to believe most are doing what they say they are doing, but does it matter, as Prof. Karani says, to shareholder value? Companies have a responsibility to not do harm (to people or the environment), but I’m not sure they have a responsibility to do good and probably will not benefit much (in terms of shareholder value) from trying to do good.
I don’t eat Ben & Jerry’s ice cream because they fund a number of good social causes and groups – I eat it because it tastes really good. I don’t think there’s a big part of the populace that buys based on CSR.
Social responsibility is anything but “responsible” when retailers and consumer brands take it too far in any direction. The exception of course being when the social issue is also what drives the marketing of a given product. However, in most cases it’s best for a retailer or a consumer product to stick with what it knows best and market its products and services agnostically to its targeted consumer. Not what everyone wants to hear but we’re talking business, market share, and profitability.
CSR programs are, in my humble opinion, upside down. Ignored in all of these conversations is a critical point. If the customers that sustain a business think this is a good thing for the retailer to do (think Whole Foods), they will reward the company. If they don’t think it’s a good, or even relevant, thing to do, they won’t. Having a vocal minority prescribe these things for their own sake is both a potential waste of money and a possible company killer. Unfortunately, all these “socially responsible” individuals take no responsibility for any of the potential outcomes.
There once were two professors from Michigan
Who let their erudition go fishing again.
Their lines sank deep into wisdom’s revealing stream
And caught a CSR trout with no profit scheme.
CSR is the retailers human goal
But without profits it demands a heavy toll.
It’s impossible to talk about CSR without considering all the “true” costs associated with how businesses create and deliver their goods. How do we put a true cost on pollution? Was GE CSR when it dumped pcbs into the Hudson 50/60 years ago? Did the cost it incurred subsequently to attempt a cleanup reflect all the costs of the damage done?
Until businesses, governments and society begin to make an effort to create a better accounting system for these intangible and often not so intangible costs, CSR will be nothing more than greenwashing for the 95% of the companies that do business. Business will take advantage of loopholes, doing harm where they know harm is being done, because no cost has been created to tag onto the P&L; and therefore it should be ignored to fulfill the so called highest goal of most businesses: maximize shareholder value (a goal which itself is debatable, and only adopted in the early 80s).
Interesting timing for this discussion. There was an article in “Adweek” just the other day (November 5, 2010) that was headlined “Corporate Social Responsibility Still Matters.” The article reports about a study conducted by Harris in which 18% of respondents said that a company’s “reputation for social responsibility” has a “strong effect” on their decisions “about what to buy and who to do business with.”
Since public corporations’ responsibility is ultimately to do no harm while producing the best returns possible for shareholders, I guess the debate should come down to two issues: 1) Is that responsibility to shareholders tied to the current quarter, or is it about delivering greater value over a longer term? 2) How much does it cost the corporation to be socially responsible, and how much is it worth to the corporation to “strongly influence” the buying decisions of 18% of customers?
There is on one place for Corporate Social Responsibility. That is if it benefits the business. It can benefit the business in many ways. It can make happier, more productive employees. It can make the community in which it operates more welcoming. It can provide a great image for consumers to buy into.
However, it is probably a good bet that no company practices CSR without some rational, if not measurable return. If there is no return, it is contrary to the mission of the company.
So, where does the corporate responsibility lie? Unfortunately, it lies with regulation. Though as a country, we do not like the idea, without considerable business regulation, the practices that we find so abhorring by financial institutions, pharmaceuticals companies, energy companies, chemical companies and the like, would explode.
Do companies make political contributions to candidates because they want the best candidate for the country? Or do they want the best candidate for their own purposes? If that contribution is going for other than corporate purposes, the CEO ought to be fired.
Without getting into global warming and environment, I think of an astounding picture taken in 1950 on a summer day at noon in Pittsburgh. The smoke from the steel mills made it look like nighttime. It would have been corporately responsible to never have let that happen. It would have been corporately responsible to clean it up without encouragement. However, it took government regulation to clear the air.
Some would say that the above is a perfect example of destroying an industry. However, there is a corollary that suggests that if the management of the steel industry was more enlightened, that they might exist today.
There is a difference between “talking the talk and walking the walk.” Most corporations do a good job of “talking the talk”; but many less actually “walk the walk.” Corporate’s main objective is to move the profit arrow up. While there is a need for social responsibility; it will not replace the profit motive. We all want to do the right thing which covers the social responsibility; but not at the expense of making money. Is it right? No. Is it what it is? Yes.
Personally, I’d rather see retailers pay a living wage to their full-time workers than support any other cause. That would be the responsible thing to do. There are so many in this industry who have to work odd hours with many demands and yet still find they need to rely on government programs to make ends meet.
Judging by the comments here, I think some people don’t quite understand the concept of social responsibility.
First, This isn’t about social “promises” – it’s about acting responsibly. Doing the things that you believe will contribute to a stable and sustainable context for your company to grow.
Second it’s false to try and reduce this to dollars and cents, but no sense. In other words this no different than your own personal behavior. If you see a hundred dollars in an open window in your neighbourhood, you may be financially better off for that minute taking the dollar, but you could ask yourself if that is a positive or a negative in the long run for your neigbourhood as a whole. Similarly, a company that ravages its environment just to make next quarters profits needs to ask if that is going to make the company last longer or shorter.
Of course many executives don’t care–as the game they play is rigged and when it comes to “making the numbers” each quarter, they don’t mind slashing and burning their own internal human capital just to boost their own pockets. But there isn’t any way that one can say this is a net positive to our society.
You only have to look at how America is ravaging itself lead by Wall Street while saying “business is business.” Well it’s not–at least not unless you think business is better off with an unstable economy, mass unemployment and political madness on the rise. At some point you have to realize that it would have been better for all of us if all those execs had kept their hands out the cookie jar and asked themselves what the right thing to do was for society as a whole, rather than their next monster bonus based on mass deception and fictitious profits.
If top management really believes in CSR and monitors its corporate actions in key areas (or has an outside organization do this for them), CSR will not be window dressing. It takes years to establish this kind of credibility with consumers and stakeholders, and the credibility earned can quickly go away as we have seen in so many recent examples.
I disagree with others who say, “It’s the corporation’s responsibility to make promises and break them.” That is exactly what’s wrong with many corporations and why so many people are skeptical of institutions.
Every corporation should have some key social responsibility markers that they stand behind and communicate about. CSR can be everything from contributions to local charities, donations to local schools which result from purchases, to larger efforts that focus on health, environment, sustainability, hunger, local, safety, etc.
I see no reason why corporations can’t make profitable decisions based on their efforts in social responsibility. Even focusing on one key area is better than focusing on nothing.
Remember those astoundingly provocative quotes on the sides of Starbuck’s cups? Hmmm, what happened to them? A decision seemingly unnoticed, but it may just be one factor that totally indicated a company that had lost touch. It began with ‘words’ and a disconnect. They have since by all appearances become a retailer that is showing more and more indications that they have lost their way.
There was a book of recent entitled “Shut up and sing.” Relating that, it would be “Shut up and make coffee,” or whatever it is that you sell or hope to sell.
Be as corporately responsible as you’d like, but talking about it doesn’t make it so. Corporate actions speak so much loader than promotion. Offending entire blocks of consumers doesn’t make life easier, either.
So in short, just do it. Shut up. Deliver to your customers what they want. Then, do whatever you want with your profits and your company. No amount of talk is necessary about it. Just as Starbucks began its pursuit of delivering a message, they simultaneously lost their focus on delivering a great coffee experience. Are the two connected? Maybe, maybe not. It’s worth thinking about.