Corporate social responsibility: Fab or fad?

Corporate Social Responsibility measures considered

There is an ever-increasing recognition that business should consider the effects it has on wider society. But are such Corporate Social Responsibility'(CSR) measures effective?

YES

argues graduate student, Calvin Davies.

I once asked a friend to check my covering letter for grammatical mistakes. Seconds into reading through it she stopped and asked me why I was wasting precious space explaining my love of the firm's building 40 wells for poor people in the developing world. Didn't I realise, she asked, that it's just a load of rubbish and surely the recruiters reading it would disregard it?

That got me thinking. Should we take at face value the claims of the corporations who insist that they care about the wider stakeholders in society? Or is Corporate Social Responsibility simply an elaborate PR stunt, a cheap attempt to buy credibility and mask disconcerting practices?

Certain corporate firms may try to masquerade as Oxfam, but still, these questions are not easy to settle for a number of reasons.

For one thing, while it's great that corporations are shelling out huge sums of money on development projects across the world, these sums of money are usually still a mere pittance relative to total earnings.

Another reason is that a lot of the CSR initiatives - like the adoption of 'green', environment-friendly policies - can come across as simply jumping on the bandwagon.

What's more, while corporations might genuinely want to do business absolutely ethically, the simple truth is that this is very often easier said than done. Imagine you were the CEO of a large financial firm and you are confronted with the dilemma of underwriting Company X's Initial Public Offering (IPO) but Company X is also involved in murky dealings with undesirables around the world. What would you do in this situation where your responsibility to your shareholders seems to clash with your responsibility to society?

Despite these difficulties, I think Corporate Social Responsibility initiatives are actually making a difference. They are really making businesses sit up and think about their actions in a truly global context and making many firms turn over a complete new leaf, acting responsibly and helping to improve the quality of life for all the stakeholders involved directly or indirectly in their venture.

One example of this is the FTSE4GOOD Index which measures the extent to which firms are acting 'socially responsibly' serve as an easy barometer for investors looking to invest in ethical stocks.

Certainly you as well can help make a difference. The next time you're grilled at a job interview, perhaps you should start grilling your interviewer on what their firm's Corporate Social Responsibility policy is and how they are trying to improve it.

Calvin Davies studies Finance at Durham University.

NO

argues third year student, Maria Gratsova.

Corporate Social Responsibility is all the rage right now. Take a closer look at that firm you're applying for an internship or job with. You'll probably find that it has departments, directors, and a whole raft of policies to prove that it takes its 'social responsibilities' seriously. The funny thing is, if these developments really were successful, there would no longer be a need for the departments, the directors, or the policies because corporations would be operating in a sustainable way as a matter of course; the special CSR measure would not be necessary. So what's going wrong?

First, it seems that CSR is still seen by corporate firms as a 'box to tick' rather than a real long term commitment. While a certain amount of social pressure from various non-governmental organisations and other parts of civil society, there is still a long way to go until the fundamental mentality within the financial world changes on this issue.

Second, the regulators are too feeble - they are simply no match for the giant corporations they are supposed to be controlling. As long as the regulators continue to be weak, progress will only be marginal and superficial. The lesson of voluntary codes like the Equator Principles - launched and adopted by the world's largest banks - is that the outcomes of CSR measures will only succeed in the long term if the agreements are actually binding. Self-regulation and non-binding agreements are just a recipe for corporate non-compliance merely dressed up as positive changes by corporate public relations officers.

So what is the solution to the current inadequacy of CSR measures? I think the solution lies in adopting measures that are directly related to the corporations' primary role. It's about time business and finance thought outside the box.

For example, providing banking services for the poor (e.g. microfinance lending) is an act of corporate social responsibility that has the potential to really make a difference while remaining within the remit of a large corporation's core functions; the same is true of using local expertise and knowledge to better judge the impact of transnational corporate operations.

Having said all this, perhaps the problem with corporate social responsibility is that corporations don't have a social responsibility. The legendary economist, Milton Friedman, has pointed out that the real responsibility of business is to increase its profits; business is not answerable to society but shareholders. But surely, the future of the world - our world - is more important than share prices and dividends, isn't it?

Maria Gratsova studies International Relations at the London School of Economics.

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