The Future of CSR and the War of Words
4 June 2014 at 10:35 am
Disputes over the meaning of CSR continue to rage, yet three key questions can be used to define approaches to the field, writes international CSR scholar Duane Windsor.
Corporate social responsibility (CSR) is a concept that seems to generate endless disputes without solution. One is either for or against CSR. Some critics defend owner wealth creation, or characterise CSR as “two-faced capitalism” or PR “sham;” and some advocates defend “doing well by doing good.” There is a lengthening list of proposed complements, substitutes, and integrative frameworks for CSR under various labels. These wars of words do aim at shaping the future of CSR practices.
The case for and against CSR
Cases for CSR involve moral, stakeholder, and strategic dimensions. Every manager makes value judgments and assesses stakeholder influence in formulating and implementing strategy. The classic argument asserted against CSR is that a business operates primarily to increase owner wealth in competitive markets. Milton Friedman emphasised that managers of public corporations engage in CSR largely to implement personal preferences in violation of fiduciary duty. He also argued that such CSR activities are positioned on a slippery slope to socialism undermining the appropriate role of government in providing public goods.
However, the classic argument that a business operates primarily to increase owner wealth is subject to obvious caveats. First, as Friedman noted, privately owned firms may do as the owner chooses, so that criticism about agents is restricted to public corporations. Second, to further paraphrase Friedman, all businesses are subject to moral and legal rules of the game. The marketplace is not an unregulated free for all; although the debate concerning CSR then partly shifts to a debate over content of ethics and laws. Third, the classic argument necessarily admits responsiveness to influential stakeholders (especially customers and employees) who have expectations favoring CSR, although such responsiveness is a strategic consideration and not a moral choice by managers in favor of CSR.
As Jack Welch, the former head of GE has explained, owner wealth creation is not a strategy but a result over time of sustainable strategy – and thus shaped within ethics, laws, and stakeholder expectations.
A vigorous debate
A vigorous debate over an important topic like CSR is to be expected. The wars of words partly reflect multiple theories, interests, and issues at play in CSR terrain. Multiple theories arise from economic, environmental, legal, moral, political, and strategic viewpoints. Multiple interests include academics, businesses, consultants, governments, media, and activist NGOs. There are multiple specific issues such as child labor, climate change, conflict minerals, and corruption.
Today, many companies issue periodic non-financial reports under various labels – including CSR, citizenship, responsibility, sustainability, and variants. The proliferation of report labels could be just management taste, or may reflect a more calculated emphasis on a preferred perspective. There have been arguments (in various forms) that “CSR is dead, long live …” social enterprise, shared value, strategic philanthropy, social accountability, or other proposed substitutes for CSR.
Three important questions
Within the swirl of debates over contested terrain, there remain three foundational questions at the core of CSR.
One question concerns design of the rules of the game for business accountability. Do minimal or strong rules best increase social welfare over time? The Christian Aid report “Behind the mask: The real face of corporate social responsibility” criticising CSR projects as mostly corporate PR was also a call for increased corporate accountability enforced by government.
A second question concerns the responsibility of businesses: what should each business do about each CSR issue (under whatever label). How should businesses (and customers and employees) react to child labor practices?
The third question concerns philanthropy by businesses and wealthy business owners. Are efforts by businesses to reduce environmental damages philanthropy at the immediate cost of owners or strategy aimed at sustainable wealth for owners?
How one answers these three questions in detail tends to determine one’s view of CSR.
About the author: Duane Windsor, PhD, Rice University, Jones Graduate School of Business, Lynette S. Autrey Professor of Management is a keynote speaker at C-Lab, a special one-day dialogue between scholars and practitioners being convened by ACCSR in Sydney on June 23. To participate click here.