MBA student Andres Carrillo shares his thoughts on the CSR enigma.
Corporate Social Responsibility: Is it really so responsible?
We often see stories in the
newspapers about successful CSR initiatives, how many people they benefit and
how much value they create for society at large. However, what happens behind
closed doors when the paparazzi have left and these initiatives are left to
fend for themselves? According to
Margaret Ormiston and Elaine Wong of the London Business School, Corporate
Social Irresponsibility (CSiR) is a real concern. In a recent study published
by the aforementioned authors, about one in five CSR initiatives becomes
inevitably a corporate act of social irresponsibility. The duo found a strong
positive correlation between leaders in a company that are publicly committed
to CSR and the likelihood of a company committing CSiR in the future. In other
words, CEO’s who publicly commit or speak in a way that heightens their
reputation for moral behavior are more likely to oversee a company whose
actions turn out to be at least partly more irresponsible than peers with a
less public take on CSR.
The public component of CSR makes
us ask what the true motivation for embarking on CSR initiatives is in the
first place. In a 2010 McKinsey survey of more than 1800 executives, more than
50% of respondents considered sustainable CSR to be very important. Only 25% of
them agree that it is a top priority for their CEO’s, and only 30% say that
their companies invest in sustainability or embed it in their business
practices. On a separate study carried out by Wesley Hutchinson, director of
the Wharton Behavioral Laboratory, a whopping 80% of executives said that CSR
initiatives were started strategically to improve their “general corporate
reputation”, or because “it (the CSR initiative) directly affects the brand
image for products and services”. It is thus important to state that many CSR
initiatives are undertaken to fulfill a secondary interest, thus providing the wrong
incentives to actually create well-being within a community.
Part of the problem comes from the fact that
CSR activity is often invisible and/or hard to measure. In a prominent 2002
lawsuit against Nike for providing a misleading PR campaign, the US Supreme
Court stated that “if a company’s claims on human rights, environmental and
social issues are required to be true, then companies won’t continue to make
statements on these matters.”
Essentially, this enables companies to publish initiatives whose impact
is unmeasurable, and thus opens the possibility of using CSR as a simple PR or
marketing plot to fool consumers into consuming goods they might otherwise
abstain from. But do we as consumers actually care? In a Co-Operative Bank
survey, 89% of British consumers said they were concerned about social and
environmental impacts, but only 18% said they reflect this in their actual
purchasing decisions. This gap in behavior makes us as consumers partly
responsible for creating the wrong incentives needed for more successful CSR
initiatives.
In aggregate, corporate social
responsibility is a step forward and should continue to be pursued as companies
continue to look for ways in which to reduce their impact and help those in
need. It is however important to look deeper into CSR and delve into its
underlying motivations and tangible benefits in order to be able to create
meaningful change and value within a community. In initiatives whose results
are often hard to measure sometimes purpose becomes superior to action.
Sources:
McKinsey Quarterly, March 2010.
I think many people are hesitant to measure and evaluate their CSR for multiple reasons. One of the biggest is the fear that good intentions don't always, maybe rarely, produce a measurable positive impact.
ReplyDeleteTo go along with your point, I think there is also an issue of how do you measure social impact? This isn't a dollars and cents game like in business but often deals with values and a mix of quantitative and qualitative results. Just look at education, we can't even "measure" student success and growth in an equitable manner let alone effectively.
DeleteAgree with Matt and Erik. Additionally, it is interesting to think about how a company's CSR initiatives really and truly sway potential consumers toward or away from purchasing products or services.
ReplyDeleteWhile I was reading this, I remembered the case study that I read in Sustainability class about Victoria Secret. The company launched a campaign showing that they were sustainable because its products were produce from organic cotton; however, a report by Bloomberg showed how the suppliers were actually harvesting the cotton. One of the suppliers was receiving the organic cotton from producers exploiting child labor. Victoria Secret denied this; however, there was evidence about this. My point here is that sometime companies brag about their "sustainability" efforts when it is just a marketing effort to attract "responsible" consumers. Here is the link with Victoria Secrets´ story: http://www.bloomberg.com/news/2011-12-15/victoria-s-secret-revealed-in-child-picking-burkina-faso-cotton.html
ReplyDeleteThere is no doubt, Andres, that it is an enigma! And one of your last comments in the post really hits home, and is one that I would raise up - how many consumers actually care? How many of us actually use our purchasing power to affirm companies that do integrate CSR responsibly and impactfully into their value chains? In response can we argue, though, that the branding of CSR initiatives is so murky that it's hard for a consumer to distinguish and make educated purchasing decisions? Or is that simply a cop-out for a society that is "consumed" with consuming?
ReplyDelete