Business Media Articles (Archived)
Corporate Social Responsibility: irritant or benefit?
By David Thomson, Managing Director, Close Invoice Finance
Much has been written lately about Corporate Social Responsibility (CSR). The debate is raging. Is CSR a positive advantage to business or is it a negative liability? Because much of the current impetus for introducing CSR in this country comes from the government, many business people opposed to it see it as yet more distracting bureaucracy and red tape imposed on the hard-pressed business executive by featherbedded civil servants.
Many in business are deeply suspicious of CSR or alternatively see it as pointless and unrelated to core business activities. But this view is fast becoming out of date. Research indicates time and time again that companies that are well regarded by the general public are those that do best. In other words, the companies that regard Corporate Social Responsibility activities as part of their Marketing and Public Relations activities are those that reap the businesses benefits from having a strong and well-regarded brand reputation, rather than those companies who are seen as being focused solely on delivering returns to shareholders.
Any company embarking on a CSR programme has to ensure that the programme is genuine. And this is the risk of it. Because if the CSR programme is exposed as a mere sham where the reality fails to match the claims made by the company, it can end up doing more harm than good to corporate reputation. So CSR cannot simply be regarded as a cosmetic bolt-on. It needs to be included in the company's corporate culture so that the public see quite transparently that shareholder value is not the sole determinant of business activity.
In fact, these days it is impossible for shareholder interests to be the sole factor in what a business does. Society is too complex and sophisticated for that. Businesses now need to take account of all their stakeholders. Responsibility can be regarded as basic things like responsibility to employees for safe working conditions but then it needs to extend out into the wider community primarily the community in which a particular businesses operates. For a company like Shell, say, the responsibility not to pollute entire regions with oil extraction is an obvious CSR application. But perhaps less obviously it can extend to financial service business engaging with the communities in which their clients and employees live and work.
The writer Ben Cohen has pointed out that "business is an extremely rich and powerful member of society. This involves both privileges and responsibilities within the community". The key question facing business is how are its responsibilities to society at large to be discharged? Many have despaired at business being able to regulate itself and deliver CSR programmes without a legislative big stick. Indeed, the present government in Britain has considered a legal framework.
Stephen Timms, Minister for Corporate Social Responsibility recently pointed out in a widely reported speech to a London conference, that a private members bill on company reporting, concerned with accountability and transparency had wide support from MPs. However, he himself wanted to see how companies might raise their game in this area voluntarily. He did not believe that a blanket regulatory approach would achieve the goal of ensuring that corporations take account of the social and environmental impact of their activities:
"CSR encompasses a very wide range of issues", Timms declared, "Some will be more critical for some companies than for others, depending on their size, the nature of their business and where they operate in the world. The environmental issues facing an extractives company will be different to those for a financial services company. There simply is no "one size fits all "solution. And where regulation can help, and sometimes it can, it needs to be well designed and focused."
This will make plenty of business see red. After all, they will say, corporate social responsibility is the responsibility of government and business is already being social responsible by providing employment. At an ideological level, this argument can be extended further to say that business encourages competitive free market enterprise, and free market capitalism is more effective than interference by politicians in achieving what the wider public wants and is willing to pay for.
There is a good deal of force in these arguments. But on balance, CSR makes sense because it makes business sense. We should see it as a potentially very powerful brand-building tool, not as simply charity. Financial services can benefit from marketing techniques that help us build the trust of the public. The debate about CSR rages on, but I suspect that CSR is going to become a permanent feature of the business landscape.
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