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Corporate Social Responsibility: A Fig Leaf for Capitalism or Path to a Better World?

Published: October 03, 2012 in Knowledge@Australian School of Business
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American economist and noted ideologue for capitalism, Milton Friedman, used to say: “There is one and only one social responsibility of business – to use its resources to engage in activities designed to increase its profits.”

From Friedman's perspective, business doesn’t have responsibilities, “only people can have responsibilities”. But his ideas are way out of step with the recent business appetite for corporate social responsibility (CSR). Embraced enthusiastically as good for business – “doing well by doing good” – CSR has been widely integrated into business practice.

Even the tobacco industry promoted CSR as part of its strategy to regain some credibility after companies became a laughing stock during the 1990s when six executives denied on oath in the US Congress that there were links between tobacco and ill health. They reset their image, away from “merchants of death” towards ethical marketers of a legal product. While they admitted smoking tobacco was risky, they argued it was in demand by people, who had the responsibility to make an adult decision over whether or not to smoke.

David Crow, managing director of the Australian arm of British American Tobacco (BAT), explains on the company website: “While we aim to grow our brands and the value of the business, we do so whilst embedding principles of corporate social responsibility within the company.” On its Operating Responsibly page, BAT lists the five areas of the group sustainability agenda – harm reduction, marketplace, environment, supply chain, and people and culture.

Under harm reduction, Crow says: “We have a responsibility to seek to reduce the health risks of our products. In the future, we expect to be able to offer adult tobacco consumers reduced toxicant cigarettes.”

It may seem brazen for tobacco companies to reinvent themselves as socially responsible corporate citizens, but it has been a successful corporate marketing strategy which polling shows has worked to boost the standing of the industry.

Despite such contradictions, the move to CSR across sectors has gone from strength to strength. The Global Reporting Initiative (GRI), which disseminates globally applicable sustainability reporting guidelines, aims to embed its standards into corporate accounting practice worldwide. Some 200 Australian organisations are using the GRI reporting framework. Elsewhere, the Puma sports goods company agreed with 20 key suppliers to issue their own sustainability reports in 2012.

Similarly, one of Australia’s Big Four banks, ANZ, has a corporate responsibility framework. In 2011, ANZ reported nine independent audits of major suppliers to ensure they had abided by its responsible sourcing code of practice. Toby Kent, ANZ’s head of corporate responsibility (CR), observed that in some organisations CR is just PR. “Yet there are many organisations which are moving to act in more sustainable ways,” Kent says. “Those doing it best are companies that closely tie their corporate responsibility activities to the core business.”

CSR or PR?

Some tobacco companies have invested heavily in CSR initiatives, particularly with regard to their supply chains and into caring for their growers, notes Leeora Black, managing director of the Australian Centre for Corporate Social Responsibility (ACCSR).

“My personal view is that until they come up with a safe product, it is all rubbish,” Black says. “Most people know this and differentiate between tobacco companies and [the] banks, manufacturers, mining companies and universities where the nature of social responsibility is different. That’s common sense.”

CSR is presumed to be inherently good, says Ajnesh Prasad, from the Australian School of Business, but his research ultimately challenges such presuppositions. He notes a potential dark side to corporate marketing of CSR, which is perceived to be ethical, but can be mobilised in unethical ways. It can be used as an elaborate way to maintain the power and authority of large corporations by exploiting the inequities in knowledge and power between them and their stakeholders.

“Corporations may market CSR to further their own interests in ways that only offer the appearance of being responsive to their social environments. CSR, thus, may become – if it is not already there – a public relations invention with little, if any, positive effect on social justice. Indeed, the marketing of CSR may be an example of corporations’ flight from responsibility – or, the quintessential instance of social irresponsibility,” Prasad says, in a paper with Ingo Holzinger of Schulich School of Business at Canada’s York University.

Prasad and Holzinger draw on the “false consciousness of ideology” framework of neo-Marxist Slovenian philosopher and social theorist, Slavoj Zizek, to show how CSR might be used by corporations as a means of enhancing their bottom line, with or without furthering social good.

Zizek’s framework links ideology with individuals’ opinions, attitudes and values to their society. It has been called the imaginary relationship of individuals to the real conditions of their existence because there is often a rift between what is assumed to be the case and the actuality.

Zizek says the mechanism helps to show how powerful vested interests with a lot of money can create a false consciousness in people about what is in their best interest – even among the very people who have most to lose. He recently referred to the contradiction that even ordinary Americans who lacked health insurance were against the reforms of US President Barack Obama, which were designed for them. The opposition – doctors, drug companies and private hospitals – reflected vested interests which framed the issue as about adults’ right to choose.

“The ongoing universal healthcare debate is an important one,” Zizek says. “This debate tackles the very roots of ordinary American ideology – you know, freedom of choice, [that] states want to take freedom from us, and so on.” Zizek's pessimistic view is that dominant ideologies can wholly structure people’s sense of reality.

Prasad says this idea of false consciousness can be useful in management theory and practice, to unpack seemingly innocuous or purely good ideas, which claim to improve the human condition for altruistic purposes, such as CSR. He uses CSR in the sense of “actions that appear to further some social good, beyond the interests of the firm and that which is required by law”.

Weighing Up Social Good

Research has highlighted the treatment of CSR as a means of achieving corporate goals rather than social good. The tobacco companies' philanthropic donations to a social cause may be seen as an act of CSR. Yet some companies have been shown to spend more money advertising their philanthropic efforts than on the actual philanthropy. Patrick Cescau, former CEO of Unilever, says the business case for corporate responsibility is fourfold: sustainable development, building reputation, growing markets and fuelling innovation.

“Clearly, within this framework, social good is only an incidental by-product of CSR,” Prasad claims.

Studies on “greenwashing” have focused attention on how corporations convey a green image, perhaps by undertaking some highly visible campaign, but without applying the lessons of environmentalism to their business processes. This leads to criticism that CSR is nothing more than a public relations invention with the intention of strategically manipulating consumers, until paradoxes are sorted out over corporate governance, ethical stances, denial of wrongdoing, human rights compliance and the priority given to social responsibility.

Prasad argues, that to be ethical, CSR and corporate marketing must include multiple perspectives, particularly those from marginalised stakeholders. “In other words, corporations will need to surrender some of their power to their external stakeholders for CSR to be consequential and effective and not consolidate their authority by using marketing to engender a false consciousness of ideology,” he says.

ACCSR’s Black points out that CSR is voluntary and goes beyond compliance – its basis is aspirational, although it's nice when it becomes compliance. It is looking to the better and the best way, instead of the minimum, as demanded by compliance.

“The moment you make it a requirement it becomes compliance,” she says.  “I am not in favour of mandatory CSR, but that is not to say compliance will not be required over time. The Australian Securities Exchange added to its corporate governance guidelines to ask companies to report on diversity in organisations. This is soft compliance. Ten years ago, CSR became part of the Global Reporting Initiative and some companies have been doing something about it since then.”

Black sides with competition strategist Michael Porter, who believes that despite trade-offs between short-term profitability and social or environmental goals, there are long-term opportunities for competitive advantage in building a social-value proposition into corporate strategy. The number of those adopting this may seem small, but the bigger and more influential companies and organisations are doing it.

“Unlike critical management theorists, these companies and organisations are working in the real world, towards a sustainable future,” Black says.

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