Corporate Eye

Spin, Fads and Taxes: CSR in the 21st Century

Is corporate social responsibility really just spin, an expensive corporate fad and a tax on shareholders’ profits?

Sonia at Remarkable Communication recently wrote a helpful article about corporate social responsibility (CSR) for small business – how small businesses should set up and use a CSR programme. As she says, what works for giant companies will work for small lean businesses too.

But she raises some interesting questions:

1. Sonia refers to CSR as 90% spin, and as a corporate fad.

CSR has been around for a long time, just under a different name. Probably ‘philanthropy’ would have covered it back in the 18th/19th centuries …

CSR includes health and welfare issues for employees, and this is perhaps the origin of CSR. Think of the Cadburys, and of Bournville, the community they built over 110 years ago to improve working conditions for their employees. Clearly, the scope of CSR has expanded as we become more aware of the impact that business can have upon its surroundings and society, but the issues are the same. CSR isn’t a newfangled fad.

CSR isn’t a fad,
it isn’t spin,
and without publicity,
CSR won’t do the good it should

It also isn’t spin, because doing it properly affects the bottom line:

  • In 2002 Xerox’s waste reduction program reduced environmental waste by 1.5 billion pounds and saved 2 million dollars. 3M saved 807 tons of waste and 8.27 million dollars.
  • Nike took a $5 billion stock loss in 1997 because of human rights issues involving reports of sweatshop labour.
  • In 2004, 80% of investors said CSR wins their trust and that they would make a decision about where to work or invest based on the presence of CSR. 86% of consumers would switch brands if price and quality were associated with a CSR cause.

2. Sonia suggests that some people will criticise a business for having a CSR programme.

I have seen this kind of criticism elsewhere, along the lines of “Company A is in business to make a profit. I’m a shareholder. Company A’s CSR programme is reducing the profit available for me to share”. Personally, I think this line of criticism is unjustifiable.

Going back in time, again, to make a point, I expect that mill-owners made more profit by employing children, but (quite rightly, in my view) this was disapproved of by society as being unacceptably hard labour for a child.

Yes, your company is in business to make a profit – but not to do so at the expense of employees; today we would add the environment and society to this. But often, CSR does not reduce profits, but can lead to higher performance and profits: companies with a public commitment to ethics perform better on 3 out of 4 financial measures than those without, and have 18% higher profits on average (Institute of Business Ethics, 2003).

3. Sonia also mentions the guilt that may come from gaining any public relations benefit from CSR.

This slightly curious thought – which Sonia also dismisses – seems to be a hangover from the days when it was thought that to do good work without renown was of better moral value than to gain some credit for it. Today, we’d say that if CSR is to improve the bottom line as well as improving matters for employees, society and the environment, it needs to be publicised. If nobody knows of the good work that a company is doing, it won’t improve morale for existing employees, entice new employees to join, improve the perception of the company among the public or sway their decisions about purchasing from the company or investing in the company.

Without publicity, CSR doesn’t do the good it should.

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