Morals under the microscope

Complicated,
edgy, delicate – corporate social responsibility can be hard to pin down. Yet
as more employers lay claim to this business attribute, it is important to
evaluate it objectively, writes Stephen Overell

In
all the years corporate social responsibility has been climbing so determinedly
up the business agenda, the amount of money British companies give to charity
has been falling. Last year, they gave £755m, three quarters of the £1bn they
donated a decade ago in 1991.1 And most of that £755m arose from the sale of
goods and services and sponsorship deals, with only £325m coming as
unadulterated corporate cash. On average, British businesses give 0.4 per cent
of their pretax profits to charity. By contrast, firms in the US give an average
of 1 per cent.

Even
among the 700 members of CSR charity Business in the Community, just a seventh
manage to reach the 1 per cent target.

Does
this mean CSR is yet more corporate moonshine? Well, not quite: charitable
giving is not the same as social responsibility. But it does illustrate that as
more organisations take up CSR, there is invariably another, less glossy,
story.

It
is great that Nike wants to stamp out school bullying, but sad that it serves
playground hoods so well; the wrong trainers get you picked on, the flash ones
ditto. It is great, too, that Coca-Cola wants to inform Africans about HIV, but
a shame it will not tell the world about tooth decay. And it is great that Bain
and Company wants to let its staff volunteer in the community on work time, but
depressing that many more might have the energy for community involvement if
they were encouraged to work contract hours.

Making
money while ‘putting something back’ is an irresistibly Blairite cocktail, yet
it takes a certain kind of grinning cheerleader to swallow it uncritically.
Many people must have had their suspicions confirmed when it emerged recently
that B&Q spent more on promoting its CSR programme than it did on the
programme itself.

Fashionable
nonsense?

It
also seems apparent that, historically speaking, many modern CSR initiatives
are rather lame – and so flagrantly aimed at tweaking a brand that they almost
invite observers to pick holes in them. In 1895, one hundred years before the
Working Time Directive, Joseph Rowntree, the great Quaker industrialist,
introduced the 48-hour week in his chocolate factories.

In
1906, he brought in company pensions at 65 – two years ahead of the advent of
state pensions at 70. In February this year, McDonald’s and 35 other big
companies signed a piece of paper saying they wanted to be ‘good corporate
citizens’.

Arguing
that CSR is all fashionable nonsense is of course very tempting. The most
elegant defence of this position came not from the left, but from the
free-market right last year. David Henderson, a former chief economist at the
OECD, argued in an essay for the Institute of Economic Affairs2 that not only
had businesses rolled over too easily in the face of the anti-globalisation
lobby, but that CSR was intellectually and morally wrong.

His
argument stemmed from Adam Smith’s observation that people enjoy their daily
bread thanks not to the benevolence of their baker, but to his selfish pursuit
of profit. Ever-inflating commitments to social responsibility will raise costs
and prices, Henderson warned, which would eventually be borne by society at
large. Further, it is not good for private companies to start weighing the
merits of competing social, economic and environmental goals; that is a job for
elected governments.

Instead,
managers should serve the people who pay their salaries. CSR risks making chief
executives important sociopolitical players, when justice demands they should
have just one vote like everyone else.

The
trouble with this line is that it seems so unrealistic. As governments shrink,
businesses have immense power, and how they use it affects everybody. Moreover,
the corporate world is under scrutiny as never before and organisations must at
least be seen to respond to the concerns of both producers and consumers positively.

In
any case, the anti-CSR lobby is losing the argument. Some 68 per cent of 1,100
chief executives surveyed recently said CSR was vital to profitability3.

Corporate
values

The
business case for CSR has most recently been put by Des Wilson and John Egan in
their book Private Business, Public Battleground4. Trying, as far as possible
to incorporate the interests of employees, business partners, customers and
share-holders into decision-making offers the best guarantee of consistent profits,
they argued.

Drawing
on research done by Harvard Business School looking at 200 organisations, they
concluded: "In companies with strong corporate values who effectively
manage their people, turnover, earnings per share and profits increased significantly
faster than the norm."

Like
it or not, therefore, this complicated and delicate subject looks as if it will
increasingly haunt HR departments. There is no more reliable an indication of
an organisation’s values than how it treats its employees – its ’employer
brand’.

The
Industrial Society claims 82 per cent of professionals would not work for an
employer whose values they did not support. In addition, it appears CSR is
becoming a direct responsibility of the HR function. According to new figures from
the Institute of Business Ethics, 20 per cent of firms use HR to enforce codes
of ethics – a major rise since 19985.

Social
responsibility

So
how are organisations to take CSR seriously without being accused of PR
puffery?

Two
things are needed. First, the whole CSR debate needs to grow up and accept that
there are no simple answers. As Jane Fiona Cumming of ethical business
consultancy Article 13 puts it, the issue of CSR is ‘edgy’ – and useful for
that reason.

No
organisation will ever, in the final analysis, be socially responsible because
the standards will always fluctuate.

For
example, in tough economic times, which employer is the most responsible: the
one that refuses to cut jobs; or the one that opts to take a difficult decision
to safeguard future viability, follows the letter of the law when making
redundancies and provides outplacement? Surely both are responsible in their
way.

Yet
while there will never be a final definition of social responsibility, minimum
standards must apply. So the second thing is a measure of objectivity – a badge
or kitemark that denotes a commitment to certain standards of ethical behaviour
across areas such as employee relations and environmental harm, that is both
reasonably difficult to achieve and properly audited.

This
is why initiatives that seek to evaluate CSR, such as the FTSE4Good index and
the Good Corporation kitemark, will become more important. Without criteria, it
is impossible to say which companies are serious and which just claim they are.

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References

1
National Council for Voluntary Organisations, 2001 Annual Report

2
Misguided Virtue: False Notions of Corporate Social Responsibility  Hobart Paper 142, IEA, 2001

3
Global CEOSurvey, PwC, 2002

4
Private Business, Public Battleground by John Egan and Des Wilson, Palgrave,
2002

5
Ethical Business, Institute of Business Ethics, 2002

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