Linking profits to CSR may not be a good idea

By | October 7th, 2005 1 Comment

csr_stanford.jpgKen Chung for 3p: In an unusual twist, some are beginning to believe that the alignment of financial and social performance are not necessarily good. Deborah Doane, a respected activist in the U.K. writing in a recent issue of the Stanford Social Innovation Review, explains that many companies are hiding behind a CSR facade when in fact there is no underlying improvement in social conditions.
Doane believes that the voluntary corporate social responsibility (CSR) equals profits approach is at best a temporary measure. When profits are at risk, companies will drop CSR efforts. Instead, she recommends that companies’ social behavior be regulated and the role of the corporation be re-considered.
There may be some merit to regulation. Research suggests, however, that corporations deliver more innovation where they are allowed to excel and gain a competitive advantage. Regulations create an atmosphere of “equality” and pushes innovation away. What we really want is for companies to create more innovative solutions to social problems.
A PDF of the full article is downloadable here. This article was contributed by Ken Chung at InformedStrategy.com.

1 Comment

Categorized: Corporate Social Responsibility|

  • http://www.cityhippy.net City Hippy

    Hi Nick

    I read that piece last week funnily enough. My thoughts are as follows:

    Yes the quickest way to a greener, more genuine CSR-oriented economy is through government regulation. But regulation cannot be the whole story.

    Governments can not and do not run businesses. More regulation (which the UK has had plenty of in the last 7 years – some for better and some for worse) will, generally speaking, inevitably turn inward investment away to less regulated spaces.

    Regulation can be and is a part of the picture and so governments need to continue to set policy very carefully. Policy that draws a baseline for companies to follow.

    Phasing out leaded petrol and CFC appliances in the UK were good examples of the level of regulation that works.

    In fact it helps to drive innovation and growth as a phased regulatory change forces new commercial paths to open up.

    But your assertion is correct…competitive advantage is a key driver for business. And governments rarely do anything to foster competitive advantage, except maybe on a competitive national scale between countries.

    What would be interesting would be if a government were to go the whole hog and massively regulate over 10 years for a totally greened economy…short-term chaos I imagine in exchange for long-term, national-economy wide, massive competitive advantage…if the nations economy survives?

    Companies need to be able to follow their own path…I guess ultimately though governments get to determine the vague direction.

    Namaste

    Al