Monday, September 29, 2008

Will the financial crisis lead to more or less CSR?

As the turmoil in financial markets continues unabated, some of those in the responsible business arena are considering what the likely effects of all this are going to be on the practice of CSR. The last decade or so has seen a seemingly unstoppable rise in interest, attention, and action on CSR issues, at least from some quarters of the business community. But with recession around the corner (or apparently already arriving for some countries), what is the prognosis for responsible business when times are hard?

Out here in the blogosphere a range of opinions are circulating. One post that has gotten quite a lot of attention came from Adam Jones of the Financial Times, who was among the first to raise the issue, and ended up somewhat hedging his bets:
"I suspect there are lots of Milton Friedman-reading managers in the private sector who grumblingly tolerated CSR programmes during the boom and would now love to get rid of them on similar cost grounds. Instead of throwing the money changers out of the temple, it would be a case of throwing the CSR priests out of the marketplace. But that would be a pretty dumb move at a time when the public mood is for more accountability and regulation, not less."
Reenita Malhotra, writing on her "Inspired Economist" blog, focused on the specific effects on CSR in the investment banking industry, arguing that such enterprises should be protected exactly because of their positive social benefits:
"A high return on investment has enabled many of the investment banks to show a solid to commitment to corporate social responsibility in the last few years"
Taking an opposite point of view, Nic Paton at the online resource Management-Issues suggested that a lack of attention to genuine CSR was actually to blame for the crisis in the first place:
"While many companies believed they were engaging in corporate social responsibility, they were in fact missing the point. Truly responsible business, rather than chasing a fast buck and in the process taking overly dangerous risks, would have considered the interests of all those who had a stake in their business."
Finally, Mallen Baker, writing for Business Respect, has taken a similar line, but has also sought to move the debate forward by looking at what this should mean for practicing CSR in the future
"Bear Stearns produced no CSR report of any sort. Lehman Brothers did not produce a CSR report, but they produced a philanthropy report. Even if they had gone further, it seems unlikely that the complex nature of how they created wealth would have been a feature. Now it needs to change. If anything is to come out of this, it has to be that corporate social responsibility once and for all leaves behind the philanthropy tag, and we see clear focus on two areas:

* How we create a different ownership structure for businesses where responsibility for consequences is a more real feature of share ownership.
* That the oversight and accountability demanded of companies now goes into the detail of how they make their money - and what are the consequences of their actions.

Two months ago, such concepts were unthinkable. Now they are essential."
Pretty profound stuff. But the prognosis for CSR is, as far as we can see, far from clear. Changing ownership structures for businesses seems a long way off, unless by this Baker means the movement into public ownership of banking institutions in the UK, US, Iceland and elsewhere. But somehow we doubt that's what he is getting at.

So, really, it's probably too soon to say for sure what will happen next on the rocky road of CSR. But hopefully our poll at the top of the page will give some indication of where our readers think it should be heading....


  1. Nice article. I posted it on our website

  2. Really great analysis. Glad that you're looking in this direction.

  3. I am often confused at why there seems to be such a disparity between Friedman and the issue of CSR. Asking the question of whether the financial crisis will drive more or less CSR appears to be backing an approach where strategic CSR aligned with the mission of the organization is more suitable. Lets not kid ourselves and remember that the real objective of any business is profit, in during this ever deepening financial crisis, perhaps we will see the emergence of far more streamlined CSR strategies. There does appear to be significant merit in appropriate CSR strategies, dealing with markets for virtue and such like, but perhaps we are seeing the end of doing good for sake of doing good. I am often worried that overdoing CSR can distract people from macro level issues. As much as we can say Lehman Brothers didn’t produce CSR reports, we can also see that Woolworths Group did produce reports. Although larger issues are obviously playing their part, we cannot expect CSR to save the day. Perhaps this Friedman idea of profits first and the instrumental role of CSR to strategically align this will the corporate objectives. Do you think the question is not whether CSR will decrease, but perhaps seeing greater alignment? No more ticking all the boxes and throwing shit at the wall in the hope something sticks?


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