In dialogue - CSR

Viewpoints and trends on key issues related to Cotton made in Africa

When the Going Gets Good
Corporate Social Responsibility is the latest industry buzzword. Many claim to do business responsibly - but few succeed. The most effective companies are those that make CSR a profit center.

A huge electronic display adorns the lobby of the London headquarters of Marks & Spencer. A nonstop text-feed tells of progress on Project "Plan A": How the renowned clothier will help 15,000 children in Uganda get a better education, how it its carbon emissions fell by 55,000 tons in 2007, how it tripled its sales of organic foodstuffs. The ticker in the M&S lobby, as the British magazine The Economist observed, is a prime example of the movement toward Corporate Social Responsibility - doing business on a sound and sustainable social and ecological basis. But the phrase is too much of a mouthful to be in widespread use, and when it does come up, its meaning varies from commitments in support of local communities to fair treatment of a company's own employees to saving the planet for future generations. But as the M&R ticker communicates, one thing is clear: CSR is booming. More and more companies issue sustainability reports, or publicly confess their social and ecological self-doubts. "The theological question - should there be CSR? - is so irrelevant today," John Ruggie of Harvard University's Kennedy School of Government told The Economist. "The companies are doing it."

Globalization dictates the run on CSR

Statistical evidence for the trend is provided by a magazine subsidiary, the Economist Intelligence Unit. In the last three years, top managers' attitudes toward CSR have changed dramatically: Where the majority of chief executives used to express a somewhat distanced approach, or even entire indifference, a large majority now stress the significance of responsible business practices for their companies - enough for The Economist to devote much of its January issue to the theme.

The reasons for the boom are obvious. Naturally, the largest companies are subject to the greatest pressure. Their reaction is the magic word CSR. In the information age, business activities are open to public scrutiny as never before. Entire brigades of NGOs turn their attention to industry - and don't always like what they see. Numerous scandals, from Enron to Worldcom, have undermined consumer trust. To position one's own reputation positively has become a challenge. Many managers hope that CSR will help, but the bottom line of most CSR activities is sobering. Many are called but few are chosen - to apply CSR in a way that truly contributes to a company's return on investment. Wherever one looks, CSR is struggling to get to its feet.

Per The Economist, companies devoting resources to CSR fall roughly into three groupings: The first is made up of classic philanthropists - companies that give back circa one percent of profits to society, because that's the way it should be. The disadvantages of noblesse oblige are obvious. Just writing checks isn't enough for many stakeholders. They want assurances that their money is doing good, and employees as well want assurances that they are directly involved. Some CSR reports lose track of the theme. The Dresdner Bank, for example, devotes 40 pages to sponsorship of art and culture, and only three to the environment - as if CSR were merely Corporate Citizenship by another name, although the company is quite active in the classic CSR areas.

The second fraction opens itself to CSR in the name of risk management. Often, these are companies whose activities receive critical attention from the public, and whose leadership understands that charitable donations alone cannot fix a reputation for disregarding the welfare of others. Those companies want to manage risk by increasing transparency, by establishing communication with NGOs and the public sector, and through self-imposed codes of conduct.

That all sounds a bit defensive, and it is only the third fraction that uses CSR in the sense proper to a market economy, by trying to earn money through responsible economic activity. This group is the smallest of the three - but it is growing fastest. As Bradley Googins, head of Boston College's Center for Corporate Citizenship, remarks, "It doesn't go very deep yet."

Corporate giving is easy, but ineffective

Of course, there are also critics of CSR. Many argue as does Professor Robert Reich: In his book Supercapitalism, the former Secretary of Labor under Bill Clinton accuses companies' CSR commitments of distracting attention from genuine issues that can only be solved by government, not by private enterprise alone.

Others argue from the viewpoint of shareholders: Managers are hired to maximize value - not to spend money on projects foreign to their core business. Here is where the representatives of the third group mentioned above see themselves left out of the equation, and rightly so: The most desirable outcome is the win-win situation. Saving fuel, for example, helps not only the planet but the bottom line. Companies that sell organic foods boost their CSR with every dollar of revenues, as do those whose profits climb with every sale of energy-efficient technology. Properly implemented, CSR is little more than good management. "My job is to design myself out of a job," says one company's CSR director.

But the road there will be long. Too many companies still understand CSR as the reproduction of decorative reports filled with well-meant projects - and not as a focus on activities that contribute to a company's economic success. In many companies, the manager responsible for CSR still reports to corporate communications. But Corporate Social Responsibility is a business plan - not a matter of public relations.

Text: Jan Rübel