The CSR debate: what are you saying?

I had the pleasure this morning of taking in the spirited webcast, “CSR and the Role of Business Today”, hosted by public interest communications firm, Fenton, and featuring a group of A-list CSR advocates and detractors.  The list and biographies of panelists, and a link to a video of the debate, are available here.

Throughout the debate, there were many fine points eloquently made by the panelists, and I encourage you to view the video of the debate, if you were not able to watch it live.  (Even if you did see it, you might get more out of it watching a second time, as I did.)  In particular, if you are a CSR practitioner or advocate looking to strengthen your understanding or articulation of the context of and business case for CSR, you’ll find some good material here.

I won’t reiterate all the debate highlights (you can check the Twitter feed, using the hashtag #CSRdebate, for the play-by-play), but I would like to consider the anti-CSR case in more detail.  Specifically, I found the arguments made by Professor Aneel Karnani and Chrystia Freeland disingenuous; let me explain why.

Turning things inside-out

In reviewing his criticisms of CSR, Karnani argued “society cannot offload all its problems onto business.”  How hypocritical is that?!  It is precisely the offloading of the problems of business onto society – what Karnani and others conveniently refer to as externalities – that has contributed to a growing demand for corporate responsibility!  Unfortunately, shareholder profit frequently isn’t made without the transfer of environmental and social costs to society at large.

Later in the debate, Karnani argued that if companies were to just focus on increasing profits, social welfare will be increased.  I wish I could share that optimism.  The problem with this argument is that it assumes that the action taken to increase profitability does not also create a social or environmental burden.  Sadly, history has shown this to be an unreliable supposition, and it remains so in many jurisdictions today.

Karnani seemed to be suggesting that companies be allowed to continue to focus on profit generation without being held responsible for contributing to the resolution of problems, which, in many cases, they play a significant role in creating or exacerbating (and which are likely to be or become material to business sustainability in the long-term).  He argued the free market cannot solve global challenges like climate change, environmental degradation, poverty, inequality, disease, and discrimination.  Perhaps not.  Perhaps not alone.  But business certainly can and arguably should collaborate with government and civil society in this regard.  Business shares responsibility, a point made clearly by Bob Corcoran and Aron Cramer later in the debate.

Both Karnani and Freeland referred often to situations where corporate/shareholder interests and the public interest are in conflict.  As I’ve suggested previously in this blog, the private interest profit motive will be more frequently aligned with public interests of environmental and social health when market “externalities” are seen for what they are: internal costs of doing business.

Throwing the baby out with the bathwater

Freeland, on the other hand, seems to be labouring under the misapprehension that CSR comprises what a company says about its actions rather than the actions themselves.  If that were really what CSR was about, I’d be right on that anti-CSR bandwagon.  But of course it’s not, and many of us practitioners in fact apply our own ethical standards and walk away from engagements that smell that way.  Corporate responsibility is about what a company chooses to do, and how it chooses to do it.  A company that talks the talk but fails to walk the walk is not being responsible; but this is a failure in integration, not in the justification for responsibility.

Freeland went on to explain that the biggest danger of CSR is that it is intentionally used as a “smokescreen” to prevent the public from examining the core business, specifically where the core business activity is at odds with the public interest.  I’m not sure what she was trying to achieve with this argument, as CSR practitioners and advocates are usually at the front of the line when it comes to speaking out against so-called greenwashing.  All I can surmise is that she has mistaken the rhetoric for the real thing, whether intentionally or not, and in so doing actually makes a stronger case for ethical corporate behaviour for anyone who can tell the difference.

It’s a commie plot

At one point, Karnani stated that “CSR is fundamentally undemocratic”, because it’s not a voting mechanism:  shareholders don’t get to vote on it (actually, they do, as so many recent proxy resolutions on non-financial material issues demonstrate).  Anyone who understands the increasingly collaborative nature of dialogue around CSR, which several of the panelists highlighted, recognizes that CSR is in fact very much about giving voice to stakeholders who are left out of decision-making in a free market economy, stakeholders who oftentimes carry the burden of the environmental and social costs of profit-making.  Emerging technologies and social networking platforms are democratizing knowledge.  They increase transparency and allow stakeholders to access information, express views, and advance change – in essence, to become CSR advocates.  How is this “undemocratic”, exactly?

Two points seemed to garner panel consensus toward the end of the debate, and I too agree with them.  First, a lack of clarity in terminology contributes to the confusion around CSR.  Second, there is a need to examine and deliberate the changing role of business in society.  In light of the notion of shared responsibility, I would argue that discourse must also consider the roles and responsibilities of the individual, civil society, and government.

Comments welcome!

  1. After having discussions on the role of business in society for many years now on many continents and in countless companies and b-schools – this debate was almost surreal. Somewhat like debating reality vs never-never land. I hope viewers asked themselves which world they want to work in.

    Advance business and societal impact…or talk about why it’s hard.

  2. (sorry, dunno why it published that. to continue…)

    Quick comment on CSR being undemocratic because ppl can’t vote on it …

    A new movement has been spawned from PRI: Sustainable Stock Exchanges. Headed by Aviva, one of the largest institutional investors in the UK, this is writing to all the major stock exchanges to demand (yes, *demand*!) that various sustainability requirements incorporated into their listing rules.

    One of these is that the company allows shareholders to vote on its sustainability plans at each AGM.

    Check it out:

    • Thanks for that link, Chris! I hadn’t heard about that initiative. I hope to see it in Canada, as there is now little requirement for companies to report on ESG matters.

    • Edward
    • October 2nd, 2010

    CSR on environmental issues are supposed to be long-term. It won’t take just a year for companies to change their perception. I feel that business have their advantages but not every businesses is tied to environmental issues. If they can make not only money but a better world, it will be like killing 2 birds with one stone. I guess the points he makes (Karnani) means like he won’t be going to live long enough to see the day. He didn’t think of his grandchildren perhaps?

    “society cannot offload all its problems onto business.”

    That phrase actually gave me the impression that he is not imaginative enough. If that is the case, it is like saying that “you are smoking in my area, and I don’t like it, and that is not your problem.”

  3. While the debate might be happening in acedemia regarding the role of business in society, clearly there is not enough dialogue amongst business leaders, government regulators and society in general to clear the confusion over the shifting roles of where each others responsibilities begin and end. Corporations are bigger and more powerful than ever and governments are getting more impotent. It is that shift of power that has spawed the need for CSR and NGOs alike. Though I might wish government would find their political courage to regulate (as Georg suggested at about 1:24), governments do not lead. It is societal demands that make government take action and it is consumers that demand corporations be ‘responsible’. It was ironic that a ‘free-market’ advocate would say that CSR is not democratic when it is clearly the market that is driving the CSR bus.

    I liked when the guy at GE said business does not have morals, leaders do. We often make the mistake that corporations have ‘soul’. They don’t. It is an economic institution designed to make profit for shareholders within our bigger and unfathomably complex capitalist system. The good news is that the people in corporations do have soul and most care deeply about each other as humans, and thankfully those humans include the CEO and executive team that run the show. We created these institutions, so we ought to be able to change them. Hanging on to old-world views of Friedman that are evidently not working out too well for us is a bit ludicrous.

    Finally, the biggest problem I see with the CSR movement is the term. It is no wonder so much time and energy needs to be spent in every conversation clarifying what we mean. It drives me crazy. I’d love to know the history of how the term got created so I could have a good rant. Er, maybe I just did.

    Thanks Celese for posting this and your articulate insights.

  4. Sorry, meant Celesa. Pretty bad form mistyping the hosts name 🙂

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