The Economist: Just good business
Corporate social responsibility, once a do-gooding sideshow, is now seen as mainstream. But as yet too few companies are doing it well, says Daniel Franklin.
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Since there is so much CSR about, you might think big companies would by now be getting rather good at it. A few are, but most are struggling.
CSR is now made up of three broad layers, one on top of the other. The most basic is traditional corporate philanthropy. Companies typically allocate about 1% of pre-tax profits to worthy causes because giving something back to the community seems “the right thing to do”. But many companies now feel that arm's-length philanthropy—simply writing cheques to charities—is no longer enough. Shareholders want to know that their money is being put to good use, and employees want to be actively involved in good works.
Money alone is not the answer when companies come under attack for their behaviour. Hence the second layer of CSR, which is a branch of risk management. Starting in the 1980s, with environmental disasters such as the explosion at the Bhopal pesticide factory and the Exxon Valdez oil spill, industry after industry has suffered blows to its reputation. Big pharma was hit by its refusal to make antiretroviral drugs available cheaply for HIV/AIDS sufferers in developing countries. In the clothing industry, companies like Nike and Gap came under attack for use of child labour. Food companies face a backlash over growing obesity. And “Don't be evil” as a corporate motto offers no immunity: Google was one of several American technology titans hauled before Congress to be grilled about their behaviour in China.
So, often belatedly, companies respond by trying to manage the risks. They talk to NGOs and to governments, create codes of conduct and commit themselves to more transparency in their operations. Increasingly, too, they get together with their competitors in the same industry in an effort to set common rules, spread the risk and shape opinion.
All this is largely defensive, but companies like to stress that there are also opportunities to be had for those that get ahead of the game. The emphasis on opportunity is the third and trendiest layer of CSR: the idea that it can help to create value. In December 2006 the Harvard Business Review published a paper by Michael Porter and Mark Kramer on how, if approached in a strategic way, CSR could become part of a company's competitive advantage.
That is just the sort of thing chief executives like to hear. “Doing well by doing good” has become a fashionable mantra. Businesses have eagerly adopted the jargon of “embedding” CSR in the core of their operations, making it “part of the corporate DNA” so that it influences decisions across the company.
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