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CSR In the Developing World: Solution or Problem?

Leon Kaye | Thursday October 28th, 2010 | 2 Comments

Many advocates for corporate social responsibility are in part motivated by the desire to improve working conditions in developing countries.  No one wants to buy chocolate that has been sourced thanks to child labor.  Electronics recycling really isn’t working if it’s happening international in workshops marred by horrid conditions.  And the manufacturing of those glitzy gadgets?  Many were horrified earlier this year during the spell of suicides in Foxconn’s factories. The episode added a waft of guilt to products including our beloved iPods and iPhones.

So companies should absolutely follow the triple bottom line, right?  People and the planet should come before profit.  It is easy to buy that idea—after all many corporations have not done themselves any public relations favors, whether their shenanigans led to product recalls, massive bailouts by the governments who were tasked with regulating them, or exploiting one group of people to provide another with highly coveted goods.  The free market has caused more pain than prosperity, right?

Not so fast, says the leader of a South African think tank.

Ann Bernstein leads the Centre for Development and Enterprise in Johannesburg, South Africa.  In her new book, The Case for Business in Developing Economies, she makes the case that the problem is not unethical corporations.  Instead, there are not enough businesses operating in countries like South Africa, which suffers from an unemployment rate that is anywhere from 24% to 33%.

Her work has been showcased in The Economist, the beacon of classical liberalism, free markets, and social libertarianism.  The thoughtful publication advocates for increased environmental awareness and suggests devoting 1% of the world’s GNP to investment in technologies to thwart climate change.  But The Economist’s writers and economists are also wary of the increased heavy hand of government—natural for a newspaper that was founded in part to repeal the system of import tariffs in 1840s England.  So Bernstein’s work has found a voice—and will make many CSR true believers squirm.

Bernstein is leery of those in rich countries who are upset with the occasional harm multinationals cause abroad.  But according to Bernstein, workers in the developing world do not have much of an option.  Take a couple examples.  Foxconn, supplier to many a computer manufacturer, has its problems, but workers still clamor for jobs there.  Coal-powered plants built by huge firms in India may anger those who worry about global warming, but that is a better option than the use of kerosene or wood.

Furthermore, Bernstein points out that the issues suffered in many developing nations are caused by government, not business.  Many of the countries that rank poorly on Transparency International’s index are in regions that “do-gooders” often fret about the most.  Africa is mostly red, as are wide swaths of Latin America and Asia.  Countries with a hostile business environment will not attract the investment.  Perhaps activists’ ire inflicted on companies should be directed to governments, instead.

The problem with the triple bottom line, according to Bernstein, is that profits are measurable, but social justice and environmental stewardship are not.  A business that is accountable to all is in effect accountable to no one, insists Bernstein, and businesses often have to make choices in poorer companies—ones that would be egregious back home.

What companies can do, and what Bernstein brushes aside, is that companies can invest, but they can buy and sell fairly.  Rather than promote philanthropic ventures, corporations can buy products at a fair price:  Ben & Jerry’s is one model for its commitment to sourcing fair trade certified ingredients.  In the end, people do not want a handout, but they do want to be paid a fair price for their hard work.  And businesses?  Well, they want measureable results—just saying “CSR pays off in the long run” will not suffice—remember that in the executives’ defense, they are pulled in many directions by bureaucrats, shareholders, stakeholders, and employees.  Numbers speak.

And the notion of what is fair and ethical here may only cause shrugs abroad.  Take the case of child labor.  Pakistan achieved notoriety for reports of footballs (soccer balls on this side of the pond) that were stitched by Pakistani children.  Most of these children worked at home with their families and were providing the necessary income, but the developed world cried foul, the workshops were closed—and many of these children became worse off—some even resorted to prostitution.  Sometimes an NGO’s objectives, no matter how well intentioned, can lead to even worse conditions for the people they were supposed to help—hence my moniker, No Goals Obtained.

CSR has proved its value to companies that have embedded sustainability and transparency into their operations.  But one issue its advocates face is that their values, while acceptable at home, may not resonate abroad.  What are terrible conditions to us are the best possible alternatives for others—and to those who are quick to criticize and nitpick corporations need to step back a bit and know the context.  After all, when you have started, invested, employed, negotiated, and confronted challenges while operating a business, your perspective is different.  Ann Bernstein skips over some of CSR’s finer points, but she discusses some ideas that the sustainability and social justice crowd should not ignore.


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  • http://www.emilyreadettbayley.com Emily Readett-Bayley

    Interesting article..last 3 paragraphs of particular importance. I’ve been working DIRECTLY with craftspeople in Indonesia for 20 years..3 groups consistently for the past 15 years….This is all still very relevant at grass roots level….just buy and sell fairly…you always get what you pay for.

  • http://businessethicsblog.com Chris MacDonald

    I think this is basically a way of advising against killing the goose that lays the golden eggs. Commerce is the only long-term solution to poverty, so poor nations need more, not less of it. That doesn’t mean any company deserves a free pass when it comes to their behaviour in those countries. But it does mean that it’s reasonable for poorer countries to make calculated moves that include lower standards to entice and keep businesses around.