The Truth About CSR II: Five False Promises

Is corporate social responsibility (CSR) the best thing since sliced bread? Does it possess an unlimited ability to solve the world's problems? Will it revolutionize our systems of supply and demand, and consumption and production? In our previous "Truth About CSR" article, we examined some of the myths and misconceptions that circulate about CSR. Today we'll look at the other side: the false promises of CSR and the truth behind them.

Efforts to implement corporate responsibility and sustainability are laudable and they bring great benefits. But sometimes the promises exceed the reality. As businesspeople interested in CSR, it's important to know what we can and cannot expect. It's important to understand the limits of CSR just as well as its opportunities.

So here are the five "false promises" of corporate social responsibility:

CSR Always Pays for Itself

The related promise is that it is perfectly aligned with business profit. Indeed, many of us in the industry have strongly argued the business benefits of CSR, to the point that one might believe that CSR always pays for itself. And it certainly is the case that CSR can often provide profit benefits for the firm. But this isn't the whole story.

Misaligned Strategies: If you do want business benefit - financial benefit - from CSR, then it's not good enough to just do anything. Your initiatives must be tied to the company's goals and operations. Otherwise, it is quite likely they will not pay for themselves and yield the benefits you might expect. If corporate responsibility is implemented poorly, it certainly will not pay for itself.

Values-Driven Strategies: Not all CSR initiatives are designed to provide financial value back to the firm. Many occur because of values and beliefs about how the company should operate and its role within society. This is OK. But it's important to recognize the value here is social and the return is a social return on investment. The initiative cannot be judged solely on its financial benefits.

CSR is for Every Company

Every company is already engaged in socially responsible activities, even simply by providing employment and paying taxes. CSR generally recognizes a more strategic approach, but nevertheless, does it naturally follow that CSR is right for every company? Should all organizations be considering their social and environmental impacts and taking steps to moderate them in a positive way?

I would like to say yes (it would mean more clients for my business) but the answer is no. CSR is not for every company. It is inappropriate at many companies, and here's why:

Companies Lack the Prereq's: Many companies and their leadership lack the basic prerequisites to engage in CSR. For example, it requires a personal interest on the part of someone leading the effort, and ultimately it requires alignment with the personal values of most people at the firm. It requires sincerity of purpose and the courage to implement the changes required. Don't bother with CSR if you don't have the foundation.

Companies Lack the Opportunity: Most companies are capable of making positive social, environmental and economic changes. But some simply aren't. And this can be exacerbated if you only care about achieving a very specific benefit for your company. If you lack the opportunity to achieve this benefit through CSR, then don't bother. Most managers lack a solid grasp of their company's social and environmental opportunities, so assessing them is a good first step.

Everyone in the Firm will Benefit from CSR

The complement to CSR being for every company is that it is for everyone. Will CSR benefit everyone at the company? After all, it is about a positive impact on organizational stakeholders, and employees are a major group. There are great benefits - personal and professional - that accrue to employees and managers from CSR. So why wouldn't everyone benefit?

Because it changes the power dynamic at work. CSR programs involve change and that change can intrude upon the mountains of power and influence that certain individuals have built up within your organization.

Ultimately, this will probably hurt the greedy manager that has horded knowledge and resources. Or the one that derives satisfaction from disrespecting their subordinates. Or the one whose "success" has been driven by a disregard for anything but profit at-any-cost. Or the one who has relied upon shady business practices. Or many others whose modus operandi is simply inconsistent with socially responsible business.

Indeed, some people just don't care! While most people find satisfaction in making the world better, others are driven solely by their own personal profit. They will view CSR efforts with extreme hostility. I wouldn't recommend trying to change them. Just determine whether they belong in your company.

CSR Will Solve All the World's Problems

Will CSR be the answer to famine, war, climate change, species extinction, drugs, energy crisis, unemployment, poverty, etc.?

Well, no. It will help. But problems involving corporations, or under their influence, are just a fraction of the social and environmental challenges we face. Many of these problems occur on an individual level. Others on a political level. And while corporations can often help to overcome these issues, they are just one actor that must be involved.

So we engage in corporate social responsibility with optimism and enthusiasm that it will make a positive difference in the world, but tempered by the realization that others must be involved and we must make personal and political changes too, in order to achieve the world in which we want to live.

CSR Will Overcome Government Ineffectiveness

I mentioned in the previous post that some are worried government's role will be usurped by the growth of corporate social responsibility. But others have actually been enthusiastic about this possibility, citing government apathy and ineffectiveness as reasons why different actors - namely consumers, corporations, and civil society - must step up to lead social and environmental progress. Indeed, there are many reasons why governments are handicapped when dealing with specific social and environmental issues involving companies.

So to an extent, CSR will help to overcome the ineffectiveness of government in managing certain social and environmental issues. But CSR is no substitute for government. Why? Because:

• Companies lack a real ability to coordinate many different actors and negotiate with them, especially across borders.
• They are well-suited to address specific, firm-level problems, but often not macro problems that affect a country as a whole.
• They do not have the redistributive powers that economically-developed governments have with their systems of taxes and transfers.
• They are not representative of the population. They are, essentially, undemocratic. Consumers and shareholders certainly have the power to guide corporate policy, but even consumers do not represent the entire population, and those with greater purchasing power have more influence. That is certainly not how we envision our democracy.
• They lack an absolute power to mandate social and environmental performance. (Although they can sometimes be very influential, like when Wal-Mart tells suppliers what to do.)

Have you encountered other false promises about CSR? Share in a comment below and we can discuss them. And if you haven't yet read the other article in this series, you can do so here: The Truth About CSR I: 10 Myths & Misconceptions.