The Death of CSR? (Jonathon Porritt)

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The Death of CSR?

I wonder if the whole concept of corporate social responsibility (CSR) will become another victim of the banking crash? With great respect to those whose lives currently revolve around CSR one way or another, I sincerely hope so. For me, its become an increasingly empty and illusory notion anyway.

I rather thought CSR would demise a few years ago when Enron went down in flames. The CSR community in the United States took quite a hit at the time, given that Enron had been lauded and garlanded as a leader on corporate social responsibility for several years before the crash. Off-balance sheet CSR was obviously a stretch too far.

But what value should we now attach to the concept of CSR in the UK banking sector? Every single one of these once-revered financial institutions have very impressive CSR programmes. Northern Rock was an outstanding exemplar of community-based engagement, as was the Halifax bit of HBOS; Lloyds TSB runs one of the most innovative CSR programmes in the whole world; HSBC has pioneered some of the most important climate change initiatives in the corporate world today. And so on.

Yet the truth of it is that every one of these institutions has been simultaneously engaged in some of most egregiously irresponsible business behaviour in the history of capitalism. Risk has been systematically mis-priced; credit has been systematically mis-sold; incentive schemes were geared to promote value-destroying personal greed; Audit Committees failed, quarter in, quarter out, to exercise any kind of proper scrutiny; non-executive Directors were suborned by utterly corrupt models of permanently rising property values, bundles of bad debt were packaged up and sold on as so many toxic time-bombs; and literally everything involved in this global scam was made more complex, more opaque, more impenetrable, less subject to scrutiny and audit of any kind – presumably for a purpose.

You can pretty much guarantee that not one of the Directors of CSR in any one of these institutions would have been consulted about any of these strategic decisions. After all, what has CSR got to do with investment strategies? With executive remuneration? With company policy on "collateralised debt obligations?" Or hedge funds? And even if they had been consulted, you can absolutely guarantee they would have been ignored – the seductive pull of big money will always trump the platitudes of corporate responsibility.

Please don’t get me wrong. I’m in no way seeking to disparage the incredible work of CSR teams in the banking sector. To a man and woman, they're great. But they (and the rest of us) have been very ill-served by their bosses and their boards.

Posted by Jonathon Porritt on October 10, 2008 10:48 AM | Permalink

Comments (13)

Jonathan,

You have raised valid points. Banking sector indeed contributes the highest in terms of CSR investments but can they afford to totally ignore it if they are weathering a financial storm? I guess not as now a lot of people are cautious about the social activities of a company and if a company totally parts ways with CSR spending then its already battered reputation will take a nosedive. CSR will take a hit but I hope it will survive.

Best,

Saad

Posted by Saad Khan | October 10, 2008 12:04 PM

Hello Jonathan,
I couldn't agree more with the points you have made.

My sense is that improving the quality of institutions is a sure answer to ensuring that business (not just financial institutions) live up to societal expectations. There is a growing sense that economic and political systems developed from a reductionistic perspective make it effectively impossible for companies to operate in a fully responsible and sustainable manner;

Widespread system flaws would certainly fail to hold firms accountable for their unsustainable social and environmental practices, would continue to exacerbate firms’ unsustainable practices, even jeopardize firms’ efforts to become responsible and ultimately deter the progress of CSR.

Posted by AC | October 14, 2008 11:32 AM

We pondered whether CSR has ‘had its day’ in an opinion piece at our website (www.forster.co.uk) in August – and pointed out that, back in 2006, the majority of participants at an IIED conference (from business, NGO and government) felt that the term CSR “could well be dead” by 2015. Were they right? And what term should we replace it with? Controversy about the ethical, legal and moral responsibility of business has been with us since Ancient Mesopotamia – and we don’t expect the coming storm of debate about CSR to be concluded any time soon. At Forster, we’ll be watching debates on ‘crunch’ CSR issues including fuel poverty and fair trade closely in the coming months…

Posted by Peter Gilheany | October 15, 2008 8:23 AM

If the financial institutions had paid more attention to their CSR departments or external CSR consultants, then they would have pursued more meaningful stakeholder consultations: and might still have their businesses and reputations in tact. CSR is not dead - it is the one strategic business tool that will rise from the ashes of this Old School Management crisis.

Posted by Ivor Hopkins | October 15, 2008 9:25 AM

Jonathon, you have hit the nail on the head (or is it the coffin?). Unless CSR becomes totally embedded in strategic decisions, governance structures, incentive systems and economic drivers, it is close to useless when the proverbial compost hits the fan. To do this might require that we don't call it CSR at all. Either way, CSR must adapt or die. Regards, Wayne.

Posted by Wayne Visser | October 16, 2008 11:05 AM

Jonathon,

A typically robust and highly readable post. I agree with much of it, particularly your accurate account of the hollowness of ethical positioning in the banking sector. It's very likely, at least in Western economies, that the term 'CSR' may not be long for this world. But your hyperbole on its imminent demise is unhelpful.

Although we would probably agree on the immense gulf between shallow 'CSR programmes' and the proper corporate embedding of sustainability in its broadest sense, it is surprising to see you coming out so strongly against what to many is still a desirable business objective. Not least because you yourself did so very much to create a business appetite for it in the first place, for which the world owes you a lot. We certainly don't look to banks for real leadership on these issues - but we didn't when they were rich either.

Whatever people call it, the quest for responsibility must go on. I would have thought the present crisis makes a stronger case for corporate responsibility than ever before. Implying that the concept is dead plays into the hands of the many companies who still think 'business as usual' is an acceptable option. When you came out in favour of BP's Target Neutral programme, did you think everything about that company was responsible? I hope not! But you were right to praise them. Please don't lose all faith in CSR. What it's called doesn't really matter in my view. The best companies in the world, like Innocent Drinks, don't even need a name for it. They just do it.

Posted by Brendan May | October 16, 2008 3:47 PM

hello johnathon and readers,
I think that a view of the world which is either totally black or totally white often leads us to immobilization. To claim the death of CSR is to paint the entire business world black. I believe there are many shades of grey along the way.

CSR is not and never will be the panacea for everthing that is unsatisfactory or irresponsible about the away business is done. Neither is CSR a total failure when businesses fail. Is a Company ever totally ethical ? If 99% of employees are ethical and 1% are not, are we to conclude that the business is ethical or unethical ? If the business had robust ethical processes, and all employees were clear about these, then perhaps we can conclude that the business did as much as it could to minimise risk of unethical practices.

If CSR is about minimising risk and developing opportunity, we have to recognize that CSR never completely eliminates all risk and it may never be enough to enable total exploitation of every opportunity. But on the continuum, more good is achieved for more stakeholders when the business is somewhere on that continuum.

CSR cant work when a business has a bad strategy. It cant work when CEO's are imcompetent. But it can show the way to progress.

We have to stop thinking of CSR as something separate from business. And we have to stop talking about CSR as though its something that we turn off and turn on when the markets allow. CSR is another mindset, another approach to traditional top-bottom line thinking, its long term not short term, and the extent to which a company embraces its principles will determine the extent to which the business, and its stakeholders will percieve benefit. CSR is not dead, and it will not die. There is no logical reason that it should. At its base, its common sense. The financial crisis is not a failure of CSR, it's a failure of governance and strategy, the dominance of some irresponsible individuals and, perhaps, the misalignment of CSR practices in one part of the business with CSR authenticity in other parts. Those businesses who had csr embedded in governance and strategy may well have fared better, though very few companies managed to reach this utpoic state and create a critical mass of responsible checks and balances which overcome "the seductive pull of big money".

Perhaps rather than pronouncing CSR dead, we could choose to think that CSR is on the verge of adolescense, where the infant stages of philanthropy, PR, a little recycling and carbon offsetting are the stages of growth. In its adolescent form, CSR will become more embedded and more present in boardroom discussions.

We cannot blame lack of progress in CSR for all the ills of business. Just as we cannot credit CSR with all the successes of business. But we should not negate the important role CSR thinking must play as the post-financial-crisis era starts to take form.

warm regards, elaine cohen

Posted by elaine cohen - potential one - israel | October 19, 2008 1:48 PM

Jonathan,

Good piece - I've blogged on a similar issue today having seen you and Felix Gummer from TESCO at the Cylch conference today. It's a question of relative v absolute responsibility is it not?

Posted by neilcynnal | October 22, 2008 1:33 PM

Quite right
it is to be hoped that one of the positive outcomes of this catastrophic irresponsibility will be to finish off csr /cr / throwing money over the fence to placate the locals...or however one wants to define it. we need sustainable business and businesses that regard sd as core. Typically, the sponsor of this year's - and one hopes the last ever - Business in the Community CSR index is HBOS...you couldn't make it up and no comment is needed.

Posted by walter menzies | October 22, 2008 3:29 PM

I must admit that I always thought CSR, like personal social responsibility, was a long-dead concept. If the poor judgement that precipitated the banking crisis hasn't finally killed it off, then it probably never existed in the first place - except on paper and in the minds of a few, deluded souls...

Taking (any kind of) responsibility these days seems to be one of those moral ideas that floats just beyond reach of the majority, who prefer to pass the task to someone else. I would suspect that the effected banks approached this from the same angle.

I disagree with the bank bail-out as I doubt it'll change anything in the long term. 'Business as usual' may take a while to re-appear, but it'll be back and just as cavalier as before. Perhaps the Government could use the current situation as a way of integrating CSR into all businesses, but it would still leave the question of who can enforce it. Self-policing would be unworkable and I doubt the Government would want the job!

Posted by Ironspider | October 23, 2008 11:27 AM

Jonathon I broadly agree with your comments. Yet, to think that corporations, whose raison d'etre has always been to serve their shareholders, ever had any real responsibility to anyone other than those shareholders, is naive and almost oxymoronic.

Admittedly, after scandals such as Enron and WorldCom, which (lest we forget) also involved frivolous banking behaviour by the likes of Citibank, the US and the World tightened up standards of financial governance. A similar move may follow the current crisis.

CSR, however, had been around for a while before, and it it is important to remember two factors which, I am sure, have always characterised it. Firstly, any organisation is no more than the sum of the people that comprise it, a social construct. Therefore any CSR strategy is only effective if people actually believe in it and enact it. Secondly, less so now than in its early days, CSR has rarely involved more than disposing of relatively insignificant amounts of cash for good PR.

The latter point is reminiscent of the sale of indulgences prior to the sixteenth century, with present-day carbon offsetting being a similar cop-out. For these very reasons, I could not agree more that embedding sustainable behaviour and responsible governance into organisations is of paramount importance.

Posted by Mat Ilic | October 24, 2008 10:46 AM

Corporate Social Responsibility.

This is a phrase that has entered the collective thinking on how businesses behave, but what does it mean for the BUSINESS?

Whilst there is a degree of altruism in everybody, how does an BUSINESS display the sort of behaviour associated with Good CSR

Milton Friedman once said ‘only people can have responsibilities’, so there is an economic school of thought that CSR is a distraction from the Profit motive, and furthermore the relationships with Stakeholders take on a different hue at the BUSINESS level of behaviour.

The emergence of CSR has marked a more towards a more holistic view of the BUSINESS’s place in the environment, whilst it cannot have the muscle of the mega firms in establishing Charitable foundations or grant bursaries, the old tradition of chequebook management of Charitable donations still works with BUSINESS’s, albeit on a different, not necessarily smaller, scale.

CSR has three main areas, namely community, environment and employees

The latter of these three areas is probably where the benefits of CSR accrue most to the BUSINESS

We have all read the stories of how Cadbury’s at Bourneville and Lever Brothers at Port Sunlight are Employers who have transformed the working lives of it’s Employees, but was this done out of Altruism and care for the fellow man rather than the economic necessity of having a healthy, reliable and proximate work force.
Indeed Cadbury’s have been criticised for outsourcing chocolate production to Poland.

CSR needs to be linked to core goals of the business, at the BUSINESS level this means survival, and therefore there is more than a sense of self interest about practising CSR at that level.

External pressures can come into play, if a BUSINESS banks with the Co operative Bank for example, then there is an implicit assumption that there will be ethical methods adopted which align with the values of the Co-op, similarly Consumers issues may affect the saleability of the product.
In 2005 MORI conducted a pole that said that 25% of the public bought a product because of it’s ethical links ( either to a charity or a cause), so an BUSINESS ignores the external Stakeholder environment at it’s peril.

CSR therefore is yet another balancing act in the Entrepreneurs repertoire, on the one hand, there is a natural impatience with business life , and the very values that led to becoming successful may well have been at the expense of CSR.

Certainly in Start ups, most entrepreneurs will have CSR low down on the priority list as it seeks to get market share( unless , of course, the new product is in fact Green in itself, which means it’s USP, ipso Facto will demonstrate the Company’s CSR credentials.
There is research done to suggest that Companies who have high performance recruitment and retention policies now have to include statements relating to CSR.

Gallup, organised data from 332 organisations which showed a link between Employee Engagement and Eps.

It is true to say that the more happy an employee is , the more efficient they are., So is CSR another Employee consideration and that Employees are either more comfortable working in an receptive environment, or are they comfortable only to be seen working in a receptive environment.

Let’s change tack here, and concentrate on the Employee, and we will also bring in our old friend Maslow and his hierachy of needs.
At the BUSINESS level the paternalistic ( and let’s not forget)altruistic view of the Employee is that a well fed and watered workforce was more likely to produce better performance than not.
If the Employees needs at the basic level according to Maslow are met, i.e food, shelter, warmth, presumably what differentiates the Employer from any one else are the nobler notions of self actualisation, if this aligns itself with the Employers views on CSR, then the Employee feels good about himself and his environment and therefore motivated to work.

In a booming economy with near full employment, basic needs are easily met, therefore we move up the hierachy, or do we?

Now is this CSR approach at the BUSINESS level any different to the Victorian ethics employed by Cadbury and Lever?

Employee focussed CSR programmes cost money, at the BUSINESS level a lot will depend on who is setting the Agenda, the Board or CEO will have to decide priorities, and the impact on the bottom line.
There is not as much pressure on BUSINESS’s to behave within CSR guidelines because the larger firms (let’s take BP as an example) have millions to spend ( and broadcast the fact) on CSR policies, there is an implicit recognition that BUSINESS’s need to survive, whereas the larger companies need to ‘give something back’.

To some extent there are double standards attached to this philosophy , and like most things in ,life there are double standards and trade offs.

BUSINESS’s juggle with cash/profit and try to get the best mix out of their limited resources like the large companies do, however they way not have the luxury of deciding what to do with their money, and they have the added advantage of not having Shareholders who actively through market forces can effect the value of the Company, so if a large Institutional Shareholder suddenly decides it only wants Green investments, there will be a cost to attaining these criteria.
The BUSINESS does not have this problem

What occasionally happens is that Ego gets the better of the Entrepreneur and at some stage in his thinking , having gone through his own personal life cycle, he decides to get involved in the local community or donate something to a worthwhile cause.
Bill Gates only set up a Charitable foundation when he had the money, he did not set it up at the same time he started Microsoft, so somewhere in his thinking he had a light bulb moment.

This is the dilemma faced by most BUSINESS’s they tread a fine line between survival and competing.

CSR is probably best thought of as engaging with your Stakeholders, and there are certainly moods of the time .
You simply have to do things in different ways at different times for different audiences.

This comes at a cost, the BUSINESS has to decide whether it should adopt these principles, going beyond the cynical altruism to truly believing that CSR is apart of it’s sustainability.
In short it is a risk/reward trade off.

Posted by Len Jones | October 29, 2008 10:09 AM

CSR can no more die than can marketing, or human resources, customer service, or operations itself.

The examples you cite are clearly of companies who have only sporadically integrated CSR into their core values. As is all too common, they did not begin at home -- in the workplace -- where they should have. Had they done so, and done so properly, they would have developed governance and control systems that would have lent transparency (and thus reduced temptation to stray) to their activities.

CSR will not compensate for bad management decisions, low quality product, or misguided marketing.

More, CSR is a process, not an end result: the end result of a robust CSR strategy is a sustainable company -- sustainable, as in long-lived, with minimal negative impact. Every company needs to achieve this goal, so every company needs a CSR component.

Posted by Bangkok Al | November 13, 2008 2:49 AM

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