Moral disguise

Joel Bakan, author of The Corporation, described Corporate Social Responsibility as a mask covering the fact that corporations are actually “designed to valorise self-interest and invalidate moral concern” – ‘Corporate Social Responsibility’ is, according to him, oxymoronic to its definition. Though that’s a harsh way to look at the initiative, its weaknesses do run deep.

 

Market forces have moulded corporations into stage actors that act ostentatiously moral to an audience of consumers, yet behind the scenes they’re anything but responsible. Fuelled by profit-maximising urges, corporations are increasingly adopting charitable acts as a way to attract consumers and workers alike, while also polishing the brand name. Yet when it comes to murky issues of human rights and war, they hypocritically drop their mighty masks of good citizenship and stick their heads in the sand.

 

Take, for example, the sponsors of the upcoming Olympics in China. All of them have taken part in socially responsible acts in China that have apparently “boosted their image worldwide”, as stated in the China Daily: while Samsung has dedicated 9 million Yuan to building primary schools in rural China, Coca-Cola has been training 1,470 farmers in other areas, such as toy production, as a way to pull them out of poverty.

 

Yet, when it comes to China’s political issues, the same corporations play dumb. Several human rights groups, such as Dream for Darfur, have been pressuring the corporations to express their concerns about China’s investment in Sudan or troubled outsiders are looking to corporations as a way to get China to readdress its relationship with Tibet. All these efforts, however, fall to deaf ears. The corporations simply act helpless by reminding people that they are after all just corporations with limited power or that their support for the Olympics is separate from China’s political decisions.

 

Their behaviour in China raises the question of just how much responsibility and power these corporations actually have. They are definitely powerful enough to be doing things that the government should be doing, like improving health care, educational systems or cutting carbon emissions. As they become more sensitive to the issues that society prioritises, these corporations continually push the boundaries of their responsibility and, since they belong to a competitive market where keeping promises holds a lot more importance than it does for a politician, they actually get things done. In developing countries, this works wonders as the corporations compensate for the governments’ incompetence. An international deregulated and privatized market has enabled corporations to be powerful enough to “fill the void” that governments leave, as stated in the Economist, which isn’t necessarily a negative thing because the ends matter more than the means – at least things are getting done. Furthermore, governments can use corporations as ideal, successful models when planning their own strategies and policies.

 

So, the problem doesn’t lie in the amount of power they hold, it falls onto their definition of responsibility. According to corporations, ‘responsibility’ means improving or reducing their impact on their surroundings – something more than their legal requirements. That ‘something more’, however, is determined simply by the shareholders’ interests meaning corporations end up acting hypocritically by addressing some issues and acting oblivious to the others. For example, in the late 1990’s, PepsiCo pulled all its investments out of Burma due to its concerns with the Human Rights issues there. Yet, other similar corporations refuse to even threaten to withdraw from the 2008 Olympics as a way to pressure China and its Human Rights issues. Why the discrepancy? Simply because the Olympics bring a lot more benefits and profits for the sponsors than Burma and its ailing economy would have.

 

It wasn’t about the Human Rights issues; it was about their reputation and bank accounts.  

You Reap What You Sow

Mr Neville Isdell, CEO of the Coca-Cola company, stated that businesses should be viewed from a “broader context”. He suggested that communities must be made sustainable, if not for the people then at least for the businesses – a sustainable community means a sustainable business. Therefore several companies such as Wal-Mart, General Electric and Coca-cola are now becoming a lot more self-conscious when it comes to their environmental actions so as not to compromise future generations since they are all potential customers.

Large business schools are also starting to pick up on this market trend and are therefore beginning to incorporate it into their programs. Kevin Thompson, a senior program manager at IBM, stated that “just as an M.B.A. is expected to know how to do financial modeling or how to read a balance sheet…increasingly there will be an expectation they can address the core society, educational, and environmental challenges”. Even the Stanford Graduate School of Business is now offering Environmental Entrepreneurship and Ethical Issues in the Biotech Industry as an added elective as well as giving students the chance to earn certificates in CSR.

Furthermore McKinsey and Company’s survey, a consultant company for large corporations, revealed that 90 per cent of global Cheif Executives only adopt CSR initiatives as a way to yeild business results.

Corporate Social Responsibility has taken a great leap from improving the here and now to improving the future, only because it’s beneficial for the companies and the trend has thus transformed from being a consumer-orientated benefits initative to becoming a business strategy central to the corporation’s planning process. After all, as the saying suggests, the more these companies sow, the more benefits they shall reap.

The free market’s antidote to its own disease

The free market as we know it has long been debated on its positive and negative impacts: it is seen as a great contributor to the world’s advancement as well as the toxic, corrosive disease that weakens its victims immensely.

Take, for example, the NAFTA agreement (the North American Free Trade Agreement). It is the treaty under international law that enables free market trading between Canada, USA and Mexico by eliminating and reducing tariffs on products of trade, such as textile, agriculture and even motor vehicles. The treaty was first put in place in 1994 and since then has led to a complicated jumble of negative and positive impacts. It has been associated with a drop in poverty in Mexico but has also been blamed for the negative imapcts on farmers there or manufacturers in the USA. The NAFTA is also blamed for the fall in environmental standards and labour welfare.

Given the controversial nature of the NAFTA,both democratic candidates in this year’s Presidential race, Barack Obama and Hilary Clinton, have decided to make it a part of their campaigns’ agenda. Both of them claim they will reform parts of the treaty in ways that will benefit American workers, as well as improve labour welfare and the environmental impacts of the agreement. But, just how effective will their efforts be?

Hardly, it would seem. Marcela Sanchez from the Washington Post suggests that the government should instead embrace and support the growing trend of Corporate Social Responsibility: it should enourage businesses and corporations from the competitive private sector to continually take socially responsible initiatives because they actually do make a difference. This, she states, rather than “government regulation or free trade arbitration”, would fix and change the environmental, economical and labour impacts associated with the free market.

Sanchez gives the example of Nike, which now has its own monitors around the world that ensure that all parts of its production chain are actually meeting labour welfare regulations and environmental standards.

And, since the developing world encounters the worst impacts of the free market, it is logical to assume that CSR initiatives are most needed there. As i stated in my previous blog, the corporations in the developing nations, such as Asia, should be encouraged to embrace the new trend because not only will it eliviate a lot of the negative impacts of the free market, it would also contribute immensely towards their economical growth.

It would seem that the free market, which gave birth to globalisation and powerful, private corporations, also developed an antidote to its own disease in the process; CSR could be seen as the remedy for the symptoms of the free trade.

 

The Tigers take their time

In my previous blogs, when i said that Corporate Social Responsibility is an increasing phenomenon, i was referring more to the Western world. The Asian tigers, however, still have to catch up.

Though there are several companies in Asia’s emerging economies that contribute to their local community, the trend has only just started because the competitive and rapidly growing market means that any CSR initiatives are still seen simply as an excessive financial cost; at their booming stages, corporations are trying to save more and spend less.

Only 100 Indian corporations are involved in social activities (which is a small number considering the enormity of the Indian market) because of the simple fact that they all see Corporate Social Responsibility to be inherent in paying taxes or adopting safe and beneficial labour laws. Additional philantropic acts are still on the low because they are perceived as excessive financial costs. In Taiwan even, there is more foreign investment in CSR initiatives than amongst local businesses.

Nevertheless, the tigers are taking baby steps. As recently as March 16th, the Taiwan Corporate Social Responsibility Association developed a course that enterprises have to take which would outline the practices and benefits of CSR as a way to promote it amongst local corporations. Even in India, a common strategy was developed for several corporations, including the Anil Dhirubhai Ambani Group, that ensured transparency of all their social operations. Vice-president of the Anil Dhirubhai Ambani Group, Sudhir Kumar Sinha stated that the new strategy will help the Indian market “define and understand” Corporate Social Responsibility practises and will thus help it to expand.

On March 17th, Aquafina, PepsiCo India’s water brand, developed new packaging labels that aim to promote water conservation within its local communities and acheive a “positive water balance” as stated by CEO Sanjeev Chadha. This step is part of their 5-year water conservation programme, which has already managed to cut water usage by 60 per cent in their manufacturing practises.

Additionally, India’s Tata Steel company has long adopted a positive outlook to Corporate Social Responsibility. It was one of the first Indian corporations to develop labour welfare, even before they become compulsory lawful practises, it has also developed educational institutions for tribals around India, giving them to oppurtunity to enter the economy and leave poverty. Furthermore, Tata developed the ‘Lifeline Express’, which is basically a train that travels out to rural areas of India to provide the people there with medication and health care, as well as setting up several low-cost hospitals around India’s more impoverished regions.

Yet, no matter how long Tata’s acheivement list continues to grow or how much water Pepsi manages to save, the basic point is that Corporate Social Responsibility is still a ‘luxury item’ in Eastern markets. It’s an additional expense that only large, well-established corporations are able to embrace.

So, we can be sure that despite the few socially responsible gems in the emerging markets, the tigers still have a long way to go.

IBM survey results

IBM survey results revealed that corporate social responsibility is seen as an oppurtunity for growth rather than a “philanthropic pursuit”.

http://www.idm.net.au/story.asp?id=9377

The article speaks for itself.

What altruism?

 I never quite decided whether human beings were capable of performing altruistic acts or not. And, I just got even more confused.  

On 3 March awards for Corporate Social Responsibility were handed out in Berlin, Germany based on the quality of 300 companies’ reports. Awards were given by CorporateRegister.com, a website that was launched to make companies accountable by obliging them to provide reports of their CSR initiatives. Only in 2007, the Corporate Responsibility Reporting Award was launched which, as the name suggests, recognises the best reports submitted.

Since the award is such a recent event, it could mean two very extremely contrasting things: that either Corporate Social Responsibility is becoming such a gigantic, positive phenomenon that it has to be celebrated in some way or that companies need an incentive, like the publicity of their brand names, to take such charitable and responsible steps. One end suggests companies are absolutely altruistic because they have, up until now, been acting without an incentive and the other extreme suggests companies are absolutely selfish or self-absorbed and need to be led onto the responsible path with hanging carrots.

Either way, the new ideas that companies have implemented do deserve a pat on the back. Even if for selfish reasons, they’re still doing the world and its inhabitants some good. Take, for example, Goldman Sachs – one of the winners of the awards. Their new initative is called the 10,000 Women programme which it launched after extensive research on the impact of women on the economy. The research was called ‘Women Hold up Half the Sky’, which outlined how the contribution of women have positive long-term benefits for the economy, found that “female education is the key source of support for long term economic growth”. Based on this, the 10,000 Women programme aims to provide 10,000 women from developing, impoverished regions with business and management education, not only as a way to help them out of hardship, but also to improve the economies of those areas. The programme joins hands with several U.S. and European universities to fund a flexible, short and practical programme around the world providing women with business and management certificates as well as some MBA and BA degrees. The initiative obviously bumps up Goldman Sachs’ already roaring reputation, with the award adding the cherry on top of that perfect sundae.

 

So, is this altrusim at its best? Or, just a result of a bunch of really good carrots pulling the donkey along? At least, Lloyd Blankfein, Chairman and CEO of the Goldman Sachs Group managed to simultaneously make 10,000 women, or more, smile – be it intentionally or not.

Reading between the lines

We all know the famous aphorism that made the central theme of the first superhit Spiderman film: With great power comes great responsibility. In the nature of all aphorisms, this one is true too; once in a position of power, the world looks up to you and relies on you whether you’re one famous individual or an entire business coporation, which serves as the basic philosophy behind Corporate Social Responsibility.

Business corporations, big or small, have recently started to pay more attention to their social impacts and responsibilities on a global and local scale. Globally, they’ve taken on the role of an altruistic philantrophist by providing to charities or investing in emerging, potential markets. For example, Coca-Cola, one of the world’s largest drinks company recently decided to take up responsibility of water conservation, in collaboration with WWF. Closer to home, TESCO has been provding scholarships for financially disadvantaged high school students in Thailand. Even Marks&Spencer is planning to improve education in Uganda for 15,000 children.

 On a local scale things are just as busy. ASDA, as recently as last week decided to take up the responsibility of the under-age drinking issue here in England. It has banned the sale of ’shooters’, which is a popular drink for young teenagers, across all its stores in hopes to end underaged drinking and binging problems. It has also considered carrying out private prosecutions to punish under-age drinkers.

 According to AccountAbility, an organisation that brings together institutions and corporations to develop ideas and connections between them, in 2007 European companies, such as BP and TESCO, were all scoring high in terms of their engagement and impact on their surrounding and global communities.

But, how much of all this activity is genuine? Sure, corporations are creatively spewing out innovations and ideas, but to what extent is it because they actually care about these issues? A lot of the sceptics amongst us assert that, in fact, it’s all another marketing technique. As The Economist stated in a recent edition, all these efforts are simply “plain risk management” and a way to “burnish its brand”. A survey they carried out revealed that more than 50 per cent of business corporations adopted a ‘corporate-responsibility’ policy because it leads to a better brand reputation. Even the San Francisco association, Businesq For Social Responsibility, found in a survey that 82 per cent of corporations and businesses feel Corporate Social Responsibility is important because it impacts what consumers buy and who they attract into the workforce, meaning more profits and productivity.

Furthermore, not only do they believe its an obligatory factor of a competitive market, the corporations act in that way too. Recently, TESCO on one hand criticised the government for its incompetence at improving the education system in Britain while on the other hand it avoided paying around almost £1bn of taxes, as stated in The Guardian. Basically, while it was publically claiming it was responsible and concerned, it was avoiding its own responsibilities.

 At the end of the day however, whether their acts are genuine or empty promotional schemes, what matters most is whether these corporations are actually making a difference; the ends matter more than the means.