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Corporate Social Responsibility moves centre stage
The question of the role of business in society has received a high
profile in recent months with a couple of films that have sought to
shine a critical spotlight on what many see has the dominant institution
of our times.
Of these, Super Size Me, is the least interesting. The
idea that it's news that if you eat nothing but McDonald's burgers you
will get fat is a fact so mundane that it seems hardly worthy of
comment, let alone making the premise for a full picture. Of course, the
picture still manages to make some reasonable hits - particularly on
the lack of real interest and supervision in a number of school
canteens.
Recent research in the UK suggests that parents believe that schools, families and individuals are primarily responsible for influencing diet choices, with less than 1 in 10 seeing the main focus as being companies. So there is a real message here about how far those institutions do or don't embrace that responsibility.
However, the more interesting work is 'The Corporation' - a film documentary based on the book of the same name by Joel Bakan. This book is a welcome relief from some of the desperate rhetoric of the anti-corporate movement, and poses some frank and fundamental challenges to the movement for corporate social responsibility.
The main contention of the book is that the company, as an institution, is so fundamentally gripped by its requirement to maximise short term returns for its shareholders that, even though companies may be run by people of integrity and good conscience, it will always inevitably behave with a disregard to the consequences on society.
It shows how leading business figures, such as John Browne of BP, have been able to make real progress and to show real leadership in moving BP towards the cause of sustainable development. It quotes Browne when he says that following such a path is done primarily because it makes perfect business sense. But then observes that when the business sense is not there - such as in the issue of whether or not exploration should begin in the Arctic, BP's position reverts to that which will make it the most money.
Corporate social responsibility, therefore, will not ever really play a part in making businesses into good corporate citizens. If the corporation was a person, it would be a psychopath. It lies, steals, even kills without hesitation when it serves the interests of shareholders to do it.
There is a serious point here. There are, indeed, real limits imposed upon businesses by the short term nature of the market. The fact that shareholders enjoy the privileges of ownership without carrying any of the responsibilities of ownership has produced one of the great anomalies of our time. It is not as though shareholders even have the ability to shape their own expectations - the law expects them to be served through financial returns. It does not recognise that shareholders might want companies to behave ethically, or to do something to build value in the long term.
This isn't a point that is exclusive to issues of social responsibility. The evidence from Jim Collins' 'Good to Great' research is that real, sustainable value creation follows from steady, quiet investment over a period of time rather than chasing every quarter's figures.
There is no doubt that we are reaching the end of progress in the development of the contribution of corporate social responsibility unless the fundamental issue about the role of business in society can be tackled.
In the mean time, the observation that CSR activity will only be undertaken when there is a solid business case is not the issue. After all, many of us have spent a lot of time in recent years arguing the business case. The issue is more one of how more of the different business leaders, making judgements based on their perception of the issues, and their realistic options, can be encouraged to show the kind of leadership and imagination Browne did in seeing how BP's enlightened self-interest could help to reshape its industry and to address a serious global problem. If all businesses imaginatively and with skill embraced only the business case options available to them, it would make a huge impact.
For the rest, there is regulation. If society doesn't want to drill for oil in Prudhoe Bay it can refuse to allow it.
The Corporation is a useful, well written and researched contribution to the debate around the role of business in society. Although it is critical of business, it does not demonise companies nor the people that lead them. It seeks to illustrate some of the consequences of how businesses are structured, and the dynamic that leads their decision making.
To be fair, it could do more to acknowledge the positive impact that the economic activity of business has alongside the downsides. And the features it attributes to business are not exclusive to that institution - after all the similarly amoral nature of the nation state has been a subject of discussion and historical analysis for a much longer period of time.
But CSR activists would do well to read this book and / or see the film. It is a useful challenge to complacent thinking on both sides of the fence.
An Article from Business Respect, Issue
Number 78, dated 20 Oct 2004
By Mallen Baker