‘Halo Effect’ of CSR Allows Companies to Get Away with Corruption

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A new study shows that companies with corporate social responsibility (CSR) programs tend to get more favorable court decisions on corruption cases completely unconnected to CSR – and that’s a problem.

One of the tenets of good CSR is that companies that care about being good corporate citizens can also increase their profits, because, oftentimes, sustainability and good ethics are winning business practices, as well as social ones.

But, as many of you know, a lot of companies use CSR as chiefly a marketing tool, to give the company a better public image while it continues to follow the same, old, dangerous business practices that leave our planet worse off. Some call this greenwashing, but I think it’s simply lying. It is an outdated form of corporate greed and short-term thinking that has no place in our modern globalized world.

Now, a study from Harrison Hong of Princeton University and Inessa Liskovich of the University of Texas found that this type of CSR, aimed at making a company look good, has the beneficial side-effect of making it more likely the company gets away with a crime, specifically, bribery as defined under the Foreign Corrupt Practices Act.

The study found that, among prosecuted firms, those with the most comprehensive CSR programs tended to get more lenient penalties. Their analysis ruled out the possibility that it was firms’ political influence, rather than their CSR stance, that accounted for the leniency: Companies that contributed more to political campaigns did not receive lower fines.

The last thing I want is for companies to create CSR programs just to improve their likelihood of escaping prosecution for other crimes. And not just because this is a bad for society, but, frankly, it isn’t good CSR either.

“We estimate that either eliminating a substantial labor-rights concern, such as child labor, or increasing corporate giving by about 20 percent results in fines that generally are 40 percent lower than the typical punishment for bribing foreign officials,” the report’s authors wrote.

That is why we need to push companies to implement wide-ranging CSR programs and standards. There is a big difference between a company like BP spending money on a massive PR campaign alongside a few donations to coastal victims of its massive oil spill (for which it got a multibillion-dollar fine), and a company like Unilever willing to implement zero-deforestation throughout its supply chain, and including NGOs and communities in the accountability process.

There is also a role that we must play as consumers. We can’t make courts hold companies accountable for corruption, but we can ensure that we only do business with, or buy products from, companies that truly care about people and planet alongside profit. That means regularly checking resources such as the Good Shopping Guide to see if companies are truly ethical, and pushing companies that are lagging, such as PepsiCo and its resistance to sourcing conflict-free palm oil, to be leaders.

CSR is just one piece of the puzzle. This once again demonstrates that the true power is in our hands.

Image Source: Chris Potter

Nithin Coca is a freelance journalist who focuses on environmental, social, and economic issues around the world, with specific expertise in Southeast Asia.