CSR: origins, limits. (II/III)

CSR: origins, limits. (II/III)

In the first blog post, we tabled our own understanding of governance, broader than the one commonly understood by corporate governance. However, the interpretation we put forward risked to merely point towards policies along the lines of corporate social responsibility (CSR). This blog post therefore challenges the prevalent understanding of CSR, before the next blog will close the loop on our public relations approach by elaborating our own public relations approach.

It is no secret: the very credibility of CSR has suffered from the suspicion of merely being a marketing tool. Instead of rushing to that conclusion, however, it might be worth taking a look back:

Where does CSR come from, and what are its limits?

An evolving concept

When speaking of business and ethics, chances are that CSR will be the first notion to come your mind as part of a company’s broader governance approach. The underlying idea of CSR is older than one might expect. Voluntary private sector action emerged as a concept in the more liberal market economies of the Anglo-Saxon sphere in the early 20th century. Corporate philanthropy, as it was known, gradually moved from the practice of lump-sum donations to investments targeted towards specific groups – stakeholders one would say today. Corporations increasingly made such strategic ‘investments’ for their staff in, for instance, accommodation, health or education.

Only in the 1980s and 1990s did ‘CSR’ emerge as the key concept for business ethics, which ever since have been increasingly submitted to standards and labels, whether they are set independently or not. Not least in response to accidents, compromising revelations and the following adverse media attention did global players like Nike, Gap or Bhopal start unilaterally adopting codes of conduct, occasionally in combination with various forms of auditing or other verification and accountability mechanisms. Nowadays, companies from SMEs to large corporations dedicate important resources to the cause of CSR, be it an entire department or a sole CSR Manager.

The context: a gap between markets and regulation

This development must be placed into context. While markets expand across borders thanks to liberalisation and globalisation, regulatory state power does not follow that trend and remains largely stuck at the national level, apart from exceptions such as, most notably the EU, or, to a limited extent, for example the ILO or the Human Rights Council.

The social, environmental and other standards companies voluntarily commit to can thus be conceived as a form of private or civil regulation. This kind of regulation has developed in reaction to a new economic order that lacks the political power necessary to efficiently regulate and remedy inherent market failures at the international level – mostly in terms of competition, labour and environmental standards. CSR is an emblematic example of civil regulation that intervenes in this gap between economic markets and political communities.

In other words, a gap between markets and political power has opened up, creating the need for companies to regulate themselves and to follow some kind of ethical principles.

The drivers behind CSR policies

Nonetheless, the key question remaining is what drives companies to act ‘responsibly’ when they do not necessarily have to. Much ink has been spilled on this question, which remains far from being settled. Unsurprisingly, there is a tension between the ethical values presumably underlying CSR on the one hand and the material interests of company, the so-called business case, on the other. The business case for some form of business ethics can certainly be declined into different drivers, such as an enhanced work environment, improved productivity or the attraction of prospective employees. According to academic findings, however, it most importantly is the mitigation of reputational risks or simply reputational enhancement that all too often are decisive drivers of CSR. In particular due to these reputational risks did the rise of global brand names and ICTs favour the emergence, professionalization and departmentalization of CSR. This is CSR 1.0. This is what might easily be dismissed as ‘PR’ action.

What makes CSR a ‘Crisis Scandal Response.’[1]

CSR 1.0: an unsatisfactory concept?

Two further shortcomings of CSR should not go unmentioned. First, reporting on CSR usually consists of regular audits of the progress made on different indicators. Yet, this way of proceeding is all too often mired in tedious and repetitive tick-box exercises that yield progress only, if at all, at an excruciatingly slow pace. Second, what the CSR community at large tends to lack is the political understanding for the interests and values of stakeholders, be that within the company, the customer base, or throughout the supply chain or even society at large. As one of the more striking examples, consider the following question: how can white, middle-class men understand what it means for female sewers in the supply chain not to earn enough for a living, after 13 to 16 hours of work a day?

Whether a company pursues CSR policies because of a business case or for reputational reasons, CSR effectively stops being an end in itself and turns into a means to an end if there is no genuine ethical conviction throughout the company culture – starting with the CEO. Considering these fundamental issues of credibility and effectiveness besetting conventional CSR 1.0, it might be time to look for an additional, complementary but more comprehensive understanding of CSR.

In the next blog post, the objective will be to develop an approach which builds on the achievements of CSR 1.0 but takes into account the shortcomings of CSR, while drawing on our understanding of governance and placing this agenda into a public relations perspective.

Philippe Beck

[1] VOGEL, David (2010), Taming Globalization?: Civil Regulation and Corporate Capitalism, in COEN, David, GRANT, Wyn and WILSON, Graham (eds.), The Oxford Handbook of Business and Government, Oxford: Oxford University Press, pp. 472-494

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