The Truth of Corporate Social Responsibility and Why It Matters
Part 2: Beyond Profit — Read part 1 here
There is a growing body of quantifiable evidence to suggest that CSR has financial benefits and it is this point that many proponents of CSR tend to focus on; however, beyond the omnipresent corporate exigency for profit, there are other reasons and rewards to be had. It is fair to say that proponents of CSR have in mind, or at least must argue for, some sort of (often financial) positive outcome to its enactment, yet not all these outcomes are necessarily financial or easily measured. Further, while this may seem like a conflict of interests, especially where large scale business is concerned, there actually are some sound arguments for it. In this part of our series, we will take a deeper dive into the more altruistic ideas behind CSR.
Bona Fide CSR
In our previous foray into CSR, we mainly examined a school of thought referred to as the narrow view of Corporate Social Responsibility. In the 2011 Harvard Law article titled, “The Business Case for Corporate Social Responsibility”, author Matteo Tonello defines the Narrow case as such,
“The business-case model, in which CSR initiatives are primarily assessed in an economic manner and pursued only when there is a clear link to firm financial performance”
However, there exist other views of CSR in the business space. First, there is the converse argument to the business case, referred to as the social value led model within the same article (and so will be adopted here). In this model, CSR is integrated into business with predominantly non-economic outcomes in mind. As you can imagine the social value led model is the harder argument to make, where advocacy for the integration of CSR into businesses is concerned. This could be seen as a Purist or Altruist View of CSR. At the human level, there are definitive reasons for it, often based on long-term issues concerning societal and environmental management and sustainability.
Inequality is a natural by-product of any system to which the Pareto Distribution can be applied; this is true of everything from the distribution of wealth in capitalist societies to the birth and distribution of stars in galaxies. Matter-of-factly stated it is extremely unlikely to ever be eliminated from the human condition. Despite this reality, there is still a serious problem wherein it can be found that in human ecosystems wealth inequality is directly linked to violence and instability. After studying 70 different countries over a quarter of a century (1960–1985) a working paper published in 1993 by the National Bureau of Economic Research concluded,
“Income inequality increases socio-political instability which in turn decreases investment”
“Fiscal redistribution, by increasing the tax burden on capitalists and investors, reduces the propensity to invest. However, the same policies may reduce social tensions and, as a result, create a socio-political climate more conducive to productive activities and capital accumulation.”
By and large, this study and others have found that when the gap between the wealthiest and poorest demographics of a society grows sufficiently enough, with a greater proportion of the population in the latter category, a vicious cycle of extreme violence tends to grow to fill the void. Additionally, where our physical environment is concerned, while it may currently (with some good and reasonable arguments to be had on all sides of the aisle) be a politically charged and contentious issue, it does stand to reason that at least some attention and mindfulness in relation to our environment is warranted; it certainly isn’t a bad thing. Overall, while the social value led model of CSR cannot strictly, nor tries to, provide monetary reasons for CSR, from a grander perspective, its reasons are quite solid. Spearheaded and intelligently managed by CSR departments within organizations: some voluntary, well-planned, and consistent “charity” made by large corporations to the societies they exist in can reasonably be considered a small price to pay in exchange for continuing to have a stable society and liveable environment to exist in.
Pleasing all Parties
Next, there is the midway view of the other two somewhat diametrically opposite motivations for CSR, often referred to as the Broad View or the Syncretic Model of CSR in business literature. As far as the sustainability of each view of CSR, the Syncretic Model may have the strongest argument in that it can appeal to all sides. As we discussed previously, humankind is fond of benevolent agents; nevertheless, we also must remain grounded in a healthy degree of pragmatism to survive. The broad view of CSR encompasses both ideals. Furthermore, there is emerging research-based evidence showing that there can be a combined positive financial and social impact in implementing this approach.
One study conducted in Ghana by the Christian Service University College evaluated the business philosophy of Vodafone Ghana. It found that the company was veritably dominating almost all aspects of the telecommunications industry in Ghana at that time. Concomitantly, the same company also chose to adhere certain customs of the culture that it was embedded in. It took on ideas such as “‘ndwa nam” and “nsa kö na nsa aba” which roughly translate into the concepts of “community sharing” and “returning good for good”, in western culture, and did so with no discernible detriment to its profitability, even stating,
“We are sure that increasingly the success of our business will be based on the quality of our connection to community”
The paper concluded that there is an implicit social contract between societies and businesses. Additionally, stakeholders can still reach “strategic objectives” while paying heed to important socio-cultural values in a given society and enacting ethical practices.
One of the oldest concepts to exist both in society and in business, expressed in Latin, is that of Quid Pro Quo. For better or worse at present, the heaviest hitting justification for CSR is mainly commercial in nature. However, the lighter jabs and effective counters of the syncretic and social value led models of CSR have their essential place in the larger discourse. It is neither necessary that all rationales for CSR be tied to money nor is it helpful. In the grand scheme of things, there is inherent value in doing good. To quote C.S. Lewis,
“You can be good for the mere sake of goodness . . . ”
Ahenkora, A, Banahene, S, & Quartey, J, 2013, “Societal Value Antecedent of Corporate Social Responsibility and Business Strategy”, Vol 4 №4, Journal of Management and Strategy
Alesina, A & Perotti, R, 1993, “Income Distribution, Political Instability, and Investment”, NBER Working Paper №4486, the National Bureau of Economic Research
Tonello, M, 2011, “The Business Case for Corporate Social Responsibility”, Harvard Law School Forum on Corporate Governance and Financial Regulation