Why the Wall Street Journal is wrong about CSR

Our friend, colleague, and fellow blogger over at the University of Western Ontario, Mike Valente, has just posted a very informed and thought-provoking response to last week's rather incendiary article in the Wall Street Journal about why CSR is misguided. As you'll see from the 200 or so comments on the WSJ comments page, the original piece did not pose a particularly convincing argument, and as far as we're concerned, nor was it a very insightful one either. Over on his Business and Sustainability blog, Mike helpfully provides some good clear analysis of why the author is wrong, some of which we've re-posted  below. Mike also says where he agrees with the article too, but you'll have to go to Mike's original post to read that. We just like the argumentative bits.

It's great that Mike took the time to write this reply. When we first read the WSJ piece, Andy's deeply thought through response was, "this is suspiciously crtpyo-Friedmanite - he seems to think the world hasn't changed in the last 40 years". Dirk's was: "this guy is in cloud cuckoo land regarding the role of government". We didn't get much further than that.

So here's a extract from Mike's post:

Where I Disagree


1) Business as Passive Recipient: My greatest concern with this article is the author’s presumption that business merely represents a passive recipient to market and regulatory trends as reflected in his examples of the auto sector and health food sector. We’ve known for quite some time though that companies have played a proactive role in shaping the market and regulation for food, vehicles, and many other products and services. General Motors played a very influential role in curbing government imposition of taxes on gasoline so that larger gas-guzzling vehicles would still be attractive to the market. The private sector’s role in ‘killing’ the electric car was, according to many, not a result of any lack of market demand but the preservation of corporate interests, suggesting that business exercises the power to build and dismantle markets. So while I agree that companies will respond when the market demands change, I disagree that companies sit by idly in response with no influence on this market through political lobbying or strong marketing.


While it is true that companies have adapted to the changing demands of consumers in, for example, healthier food, this was not without strong corporate interest in preventing such trends through strong lobbying for regulation that supports practices that undermine the health of consumers. Examples here include the subsidization of corn and soy to support the processed food industry and the strong lobbying for the allowance of trans fat in food. And as an aside, the author’s argument that social activists have had little impact on changing company ways is unfounded. Many would argue that civil society organizations, non-governmental organizations, and activists play an important role in shaping market demand and consumer behaviour in spite of corporate efforts to preserve the status quo. Consider Greenpeace’s ability to catalyze a massive boycott of Shell in 1995 or the Asian-American Free Labor Association’s ability to boycott Nike products in early 1990s. More recently, the New York Times reported that banks are becoming more wary about lending to mining companies in light of growing criticism by environmental advocates such as the Rainforest Action Network and Sierra Club.


2) Business as a Political Actor: I would argue that there are indeed situations when firms are best positioned to respond to social and ecological issues regardless of the relevance to business operations. This is especially the case in the global south where substantial public service gaps exist and companies have stepped in to fill governmental roles like, for example, the efforts of several multinational corporations in Kenya to address public service gaps after the post-election conflict in 2008. While I agree that in an ideal world, government or other public bodies may be best positioned, in reality these actors are not always available and it is instead business that finds itself better positioned (see Private, but Public WSJ, 2009). Regardless of the reality of the situation, the article implies that companies should stand by and do the responsible thing which is to continue with daily operations that maximizes profitability when its surrounding communities don’t, for example, have access to food and water.


But governmental gaps exist as a consequence of an increasingly complex socio-economic environment rather than because government has lost its capacity. Similar to the economic models that are built upon a ‘theoretical’ assumption of perfect competition, the ideal scenario of which the author speaks may not exist, however logical his argument might be. So while it is true that, in theory, “governments are a far more effective protector of the public good”, the reality is that their ability to do this is waning when we consider the rather pervasive loss of power of government to regulate and provide public services, the ability of corporations to transcend state level regulation, and the growing privatization of public services. We can either keep beating a dead horse and try to revert back to a simplistic design that relies on the separation of the public and private sectors or we can begin to adapt to the reality that these lines are blurred and business might have to be involved in the solution to these problems. This is a frightening thought of course because it suggests that a profit-making entity is influencing public discourse. The truth is that this has been happening for quite some time. Perhaps our efforts should be directed to understanding this growing phenomenon, building theories to guide it, and advising managers and policy makers how to use it to align corporate and public interests.


3) Managerial Choice to be Part of the Solution: Even when activists, NGOs, and civil society groups do exist to address some of these issues, we find that business is typically brought in as part of the solution. Many unique business models of the global south represent innovative responses, suggesting that business is not merely a passive recipient to market trends but an active player in the solution to these issues. The point is that firms represent architects in finding ways to align profit with social goals. This gets to an important presumption that the author makes regarding the view that managers do not have control over the alignment of profit with public goals and that factors beyond its control determine this alignment.


Exemplary scholars like Ed Freeman argue that it is the responsibility of business to migrate to areas that ultimately maximize value for multiple stakeholders, including shareholders, concurrently. Put another way, managerial options may not be limited to being responsible on the one hand and sacrificing profits on the other OR vice versa. A manager’s job is to think outside of the box to understand how profit maximization can take place in conjunction with the maximization of value for different stakeholders; stakeholders who represent social interests. So, for example, let’s say an automotive manufacturer is pondering their next line of vehicles to be designed and manufactured. The author’s view is that the firm can do one of two things – either ‘responsibly’ make a green car at the expense of profits because no market yet exists or maximize profitability and make an SUV where the market currently resides. As already mentioned, companies have a very strong ability to create new markets and influence public policy in a way that shapes society’s behaviours. To Freeman and others, the challenge of business is to find a way to make responsibility (or ethical behaviour) and profitability commensurable. So being responsible here may involve pushing for regulation that supports sustainable vehicles and building marketing campaigns that educate the market about such products and thus make such strategies profitable.


In sum, the views put forward in the WSJ article, while relevant at a time when public and private roles were distinct and clearly defined, are quite outdated. It may be time to let go of the theoretical niceties associated with pigeonholing roles and responsibilities to different actors and recognize that the blurring lines between them may represent a future reality that requires the attention of managers, business scholars, and policy makers.

Enough said.

Photo by Adran MB. Reproduced under Creative Commons Licence

What is CSR? Free download of introduction to CSR now available

[This post has now been updated with the new edition of our textbook and a new free download. Go to the post "Corporate social responsibility in a global context - a new free download"]

We've just posted online our introduction to CSR from our 2008 text co-written with Laura Spence, Corporate Social Responsibility: Readings and Cases in a Global Context. It's available for free download here at  the Social Science Research Network, albeit only in the pre-typeset version.  In the paper we examine the nature and definition of CSR, and its emergence in different national and organizational contexts. It should be a good basic CSR 101 for anyone trying to get their head's around the subject.

Of course, the question of what corporate social responsibility (CSR) is should be pretty straighforward. It is obvious that CSR is about the stuff that companies do to improve society, right? Or at least what they do to make it less worse. Or perhaps its what they tell us they're doing to make things better, but in reality they're not really doing much of because its expensive, uncompetitive, and difficult. Or maybe its what they should be doing, or doing more of, if only they were a little more, well.... responsible.

So 'what is CSR' is a deceptively difficult question to answer. It almost immediately brings up questions of whether firms have particular types of responsibilities, what those repsonsibilities are, how much firms should be doing, for who, and why. In fact it is easier to come up with a list of questions rather than a simple short definition that pleases everyone.

Still, that's no excuse for ducking the question. Our approach in the CSR introduction paper is not to get too caught up in definitions, but to explore what unites the different definitions that are out there and use that to identify the core characteristics of CSR. In all, we identify six of these components, as shown in the figure below. To find out more, just take a read of the paper....

 
This figure is not actually in the chapter, but feel free to use and reproduce under a non-commercial creative commons licence, giving appropriate citation to the original source of the idea.

Shooting straight at Target?

Target, the American discount retail giant that has for years been trying to claw market share from its mammoth rival Wal-Mart, was generally regarded as a more socially responsible alterntive to its big box competitor. That started to change with Wal-Mart's sustainability u-turn a few years ago, prompting Fast Company magazine to recently proclaim Walmart the winner in the "sustainability face-off" between the two companies.

One area of social responsibility where Target has continued to outpunch its rival though has been in diversity and human rights. For example, Target scored a maximum 100 points in the most recent Corporate Equality Index published by Human Rights Campaign, the largest national lesbian, gay, bisexual and transgender (LGBT) civil rights organization in the US. Among other things, Target extends its employee's health care coverage to same-sex partners. Wal-Mart, by comparison, until recently provided coverage to less than half of its own employees never mind their partners. It scored just 40 on the Index.

However, in the last two months, Target's carefully nurtured diversity reputation has begun to unravel. It is now in the midst of a boycott from LGBT customers, appears to have seriously angered many of its once loyal employees, and has even had the social media campaign for the launch of its fall clothing line derailed.

The cause? A relatively innoculous looking $150,000 campaign donation in the upcoming 2010 Minnesota Governor's Race. Target made the donation to MN Forward, a political action commitee which describes itself as "established to ensure that private-sector job creation and economic growth are at the top of the agenda during the 2010 campaign" . The group works to solicit campaign donations from  "Minnesota job creators to elect candidates from both parties who support policies that enhance job growth".

So far, so uncontroversial. Target is among a number of Minnesota-based companies contributing to MN Forward, with a view to backing candidates making job creation and support for business a priority. The group is putting its corporate money behind the Republican candidate Tom Emmer in the Governor's race. And they make no bones about why: "As a legislator, Tom Emmer voted against job-killing taxes and for reduced government spending. Emmer voted with the Minnesota Chamber of Commerce 91% of the time". You can't get much more pro-business than that. So it's hardly very surprising that Target is willing to cough up a few readies to get their man in poll position. So where's the rub?

The problem is Emmer isn't just about supporting business. He's also about supporting marriage. Traditional marriage. As in, not gay marriage. All of the other candidates are in support of legalizing same-sex marriage in the state, but Emmer has been a staunch opponent of LGBT marriage rights. As he says on his campaign website: "I believe marriage is the union between one man and one woman. As a legislator, I have consistently supported the constitutional marriage amendment that protects traditional marriage.”

There's more, as the Minnesota Independent newspaper documents well:

"In 2007, Emmer authored a constitutional amendment to prohibit same-sex marriage and civil unions. In many instances, Emmer has tried to change language in bills to that same-sex couples cannot benefit. In a bill to create standards around surrogate motherhood, Emmer attempted to replace the word “parents” with the words “mother and father.” In a wrongful death bill this session, Emmer questioned the use of the term “domestic partner” just as he has in bills aimed at providing benefits for same-sex partners. Emmer has also been criticized for his association with Christian hard rock ministry, You Can Run But You Cannot Hide Intl., Inc., which has made incendiary statements about the morality of imprisoning and executing homosexuals. Emmer’s campaign had purchased table space at the group’s fundraiser and visited with the group on the radio and in person."

Ah. So, not exactly a poster boy for Target's diversity policies then. The company, a regular supporter of the local gay pride festival, is more used to being recognized for its leadership on LGBT issues. So given this kind of backstory it is perhaps no surprise that the company's campaign donation has ignited a bit of a storm. Gay rights organizations have been up in arms, various facebook campaigns have been started, and protests have been held outside of the firm's stores. Boycott plans and employee unrest have followed.

Initially, Target was unrepentant. The CEO's response to staff was an email largely dismissing the problem. In the mail, he wrote: "We rarely endorse all advocated positions of the organizations or candidates we support, and we do not have a political or social agenda. As you know, Target has a history of supporting organizations and candidates, on both sides of the aisle, who seek to advance policies aligned with our business objectives, such as job creation and economic growth...Let me be very clear, Target's support of the GLBT community is unwavering, and inclusiveness remains a core value of our company."

However, fearing an escalation of the storm, earlier this month Target's CEO issued an apology letter to employees, remarking that "while I firmly believe that a business climate conducive to growth is critical to our future, I realize our decision affected many of you in a way I did not anticipate, and for that I am genuinely sorry." This seemed to stem the tide of protest, but the story has yet to go away for the troubled retailer. Last week, the Human Rights Campaign (yes, the group that gave Target the 100/100 score for their equality policies) announced that the company has refused to "make it right" to the LGBT community by retracting the donation or making a matching $150,000 donation to a gay rights organizaton. HRC said it would be making a $150,000 donation itself to elect a pro-equality governor.

We doubt ths will be the end of the story. But what can we learn from events so far? One clear conclusion is that the recent Citizens United ruling in the US that gives private corporations the right to fund political broadcasts during elections is not going to be a field of roses for companies. Whilst it may guarantee them free political speech, the question is will they necessarily want to use it given the dangers of upsetting their many and varied stakeholders? Big brand companies especially will probably want to be proceed with politics very carefully and not without due dilligence - as Target have found to their cost.

Secondly, companies will need to get smarter about how to engage in identity politics. It is no use saying "we don't have a political agenda" when you've invested in supporting minority or under-represented groups such as LGBTs, racial minoroties,or the handicapped. The decisions may be driven by business concerns but that doesn't mean that they don't have political ramifcations. And identity-based organizations know this and are ready to exploit companies' naivety. McDonald's have already been burnt on a simialr issue, as we reported a couple of months ago. And if you want to read more, we've recently written a couple of downloadable academic papers focusing on corporations and identity politics and how to bring identity afiliations into stakeholder identification.

The point is that companies are not yet very skilled at joined-up thinking across their span of operations when it comes to issues like gay rights - or any number of other issues that reflect people's complex and multi-faceted identities. Target is learning to thnk about LGBT issues not just in relation to human resources, but also in marketing, investor relations and government relations. Next it could be Muslims, Mexican immigrants or Mothers Against Drink Driving pointing out their inconsistencies. Or perhaps the American Family Association will start boycotting them now that they've heard about all that pro-gay stuff Target were doing. Then we'll really see if the company has a political agenda.

Culture clash in business-NGO partnerships

Ten years ago last month, Jem Bendell published what turned out to be one of the most influential books yet on business-NGO partnerships called Terms for Endearment: Business, NGOs and Sustainable Development. To mark the anniversary, the publisher Greenleaf is offering a big discount on the book (50% off) and making a number of the chapters free to download. Included in the free chapters is Andy's chapter, "Culture clash and mediation: exploring the cultural dynamics of business-NGO collaboration". We're really pleased to see this and some of the other chapters made freely available. The book itself was a great collection of articles and it really helped kick start a critical perspective on partnerships and an engagement from the academic community with the political ramifications of corporate responsibility practice - a theme that regular readers will notice that we've become ever more interested in.

So in support of the anniversary Andy has written a blog post reflecting on writing the chapter all those years ago. The post will go up on Jem's website Lifeworth.com sometime later this month, but he's agreed for us to publish it here first. So here it is - and don't forget head over to Greenleaf and download some classic chapters for free. 

"If truth be told, I discovered business-NGO partnerships pretty much by accident. I was trying to complete my PhD, which was about the “amoralization” of corporate greening. That is, how business involvement in sustainability was accompanied by some form of removal of moral framing and content. I’m not just talking the business case, though that was certainly a major part of it. But also how even social mission companies sometimes failed to morally engage their employees in green business. Or how middle managers in companies would try to make environmental issues as normal and unthreatening to their colleagues as possible. “The environment” my respondents basically seemed to be telling me, was “not ethics”.

I ran into the WWF Plus Group, which is the partnership that I examine in the chapter that is included in Terms for Endearment, because one of the companies I was writing a case study on was involved in the initiative. The Plus Group (a working group seeking to implement the Forest Stewardship Council accreditation scheme in the UK) seemed to me to be an especially interesting context to explore the kinds of questions that I was interested in. Here, I sensed, the moral complexion of the different partners might come into sharp relief. Not exactly a “good” NGO facing up to a whole bunch of “bad” companies like some latter day cowboy story. But certainly plenty of potential for a collision of moral worldviews – or more broadly culture clash as the chapter title puts it.

So I got deeper and deeper into the initiative, and became invigorated by exploring the cultural dimensions of business-NGO partnerships. A number of researchers had alluded to the potential for culture problems to arise, but no one had investigated them in any real depth. In the end, I got so into it that, like a badly behaved guest, I probably wound up staying longer than I was supposed to. But I also think that the kind of work I was doing was necessary to move our knowledge up a level.

Looking back now, I think that the chapter still holds up well. It shows that there are different ways of thinking about culture with respect to partnerships, which is a point still missed by many people who study the phenomenon. In that respect, I think it’s great that Greenleaf is making the pdf of the chapter freely available. It will help to disseminate the more critical approach to culture that the piece showcases.

And then there are the insights I provide about the role played by ‘cultural mediators’ in managing cultural translations across and within organizations. At the time that I was writing the chapter, more than a decade ago, this seemed fresh and new. It captured a very real and, I think, important dynamic at play in partnerships. In fact, I’ve had a number of practitioners over the years that have the read the piece saying, ‘yes, that’s exactly what I do!”

So the identification of cultural mediators, and my analysis of the role they play in this complex cultural milieu of partnerships, still rings true. Actually today, it’s much more commonplace for partnering organizations to go so far as to formally identify such a role: NGOs have partnership managers; companies have stakeholder relationship managers and other similar posts. But if we peer beneath the surface, we’ve still got a long way to go before we really understand what’s going on here.

That said, I’ve been heartened in the last few years to see some interesting studies emerging which really help us to see these deeper cultural dynamics more clearly. May Seitanidi, for instance, explores in her recently published book, The Politics of Partnerships, the dangers posed by seeking partners with too great a cultural fit, and the limits to meaningful change imposed by managing away conflict. Bahar Ali Kazmi, who is completing his PhD at the University of Nottingham, has been looking at how cultural mediators operate among different moral logics in the realization of human rights in developing countries. So there’s a lot of great work going on. And I expect that in another 10 years time, we’ll be looking back at how the research of these emerging scholars has helped shape the evolving field of business-NGO partnerships."

The Human Factor

After two weeks a final reflective moments on the Summit are in place. You might have got it by now that, yes, I am by and large optimistic about the Global Compact and in particular the Summit. On reflection, much of it comes from the one to one interactions I had during the event.

I already mentioned Peter Solmssen, Executive VP and General Counsel at Siemens. My first question in meeting those guys always was why on earth they cut out two days of their busy schedule to hang out at this conference. For him it was about giving the corporate world a 'face'. Having an 'intelligent conversation' between parts of society which normally don't talk to each other – business, government, civil society, academia – for him was one of the benefits of this meeting. And I could so see it – not only in the very open, relaxed and engaging way we chatted about these issues, but also in the way he took part in the conference.

While Peter represents a big multinational, most of the UNCG members – and in fact most of businesses globally – are SMEs. One of the impressions I took away that the cliché we sometimes have of business people can be totally wrong. We often see them as profit hungry machines. But many of them are in fact passionate about creating something, passionate about their contribution to society, their communities and their employees. On that note, the CEO of one of the Argentinean members of the Compact impressed me a lot. Gustavo Grobocopatel is the co-founder of a large Agrobusiness in Argentina and most of all, he stroke me more as an intellectual, and as he admitted somewhat tongue-in-cheek, an accidental entrepreneur. His rationale for supporting the Compact and being at the Summit was that he thinks the world 'needs new governance'. A system of governance where business is ready to live up to its responsibilities.

Of course, not all attendees were of this calibre. As Lord Hastings, the 'Master of Ceremonies' ironically intimated in his introduction to Thursday afternoon's half-empty auditorium of roundtables, some participants had succumbed to the temptations of 'supporting the local economy' – i.e. going shopping in New York. Fair enough, these guys would just turn up once, make sure they had signed in, and otherwise take the Summit as what I saw it in my earlier blog: a ceremonial exercise which boosts their PR. In this category I would put someone like Ali Koç, third generation of the Koç family and in charge of some of their vast business empire in Turkey, which boasts a remarkable record in philanthropy. That's why I was keen on talking to him. When I approached him, the terror of speaking to a 'journalist/blogger' was galvanizing his eyes. After haplessly communicating to his PR-girl, he mumbled something of 'having a flight to catch' and walked off, making some rude comments about journalists these days. He told me to send him my questions by email. Of course he never replied.

So leaning back, the Global Compact in my book counts as what I have referred to as 'mimetic processes' in the proliferation of CSR: it becomes a legitimate 'business' by virtue of many players in the organizational field engaging in a specific management practice. By providing a platform of visible exchange and commitment the UNGC has made it just 'cool', to put it bluntly, for companies to practice CSR.

The 'cool' factor, finally, also explains another remarkable feature of the UNGC: the Summit would not be possible without a veritable little army of volunteers, interns and alumnis of the GC, who invested much of their time for free to make the Summit happen. I hung out with them at the after party in a bar on 58th at the end of the Summit. Certainly in this generation of future business leaders, government officials or NGO activists the legitimacy of responsible business practices need no further discussion. Even to the extent, as one of them told me tongue-in-cheek after a few pints, that the UN Global Compact would struggle itself to live up to one or two of its principles on labour, in particular the 'fair wages' bit. But looking at the happy crowd dancing away to the remarkable one man band that evening, I can solemnly swear to bear witness to the fact that it definitely was not into the 'forced labour' category...