The Case Against CSR? Not! Four CSR Myths Debunked

August 24th, 2010

The Case Against CSR? Not! Four CSR Myths Debunked

by Perry Goldschein

I read with a combination of dismay and amusement yet another op ed about “the case against CSR,” this time on the Wall Street Journal website. Oddly enough, it came from a professor at the University of Michigan’s School of Business, with one of the stronger CSR-related programs in the country and host of the upcoming 2010 Net Impact Conference.

This piece followed a Washing Post op ed of a similar theme only last month, calling CSR a cult and blaming it for the BP and other disasters – which could more easily be waved off due to the naivety of an author with clearly no knowledge of the field, and confused by the difference between walking and talking CSR.

These posts further arguments at least as old and worn as David Vogel’s 2005 book, The Market for Virtue, and enhanced by the more visible book from Robert Reich, Clinton’s Labor Secretary, titled Super Capitalism in 2007.

So, I will try to help set the record straight by addressing the major recurring myths from these pieces. I join some others who have already posted this week, including Aman Singh Das of The Vault, The Inspired Economist, and The New York Observer.

Myth #1: CSR claims “a duty [of business] to address social ills”
No, we don’t. Sorry for any confusion, but many serious practitioners like CSR because it maximizes long-term profits, which are indeed aligned with environmental, social and governance objectives. We understand we have to help those willing companies to work with governments and NGOs to most effectively address “social ills” in a way that helps them prosper over the long term. The other companies we “leave to” governments, NGOs and public opinion, confident that they’ll come around or slowly disappear.

Myth #2: CSR is meant to replace laws and regulations
To read the arguments, you’d think CSR advocates were the same as self-interested corporations lobbying heavily to avoid new laws or regulations because they claim they can behave on their own. I’ve never heard a seasoned CSR pro advocating CSR as a replacement for laws and regulations. To the contrary, most seem to understand that CSR is about going beyond the minimums required by laws and regulations, which often have trouble keeping up with society’s needs or adequately accounting for risks. Lawmakers continue to propose and pass new forms of legislation meant to address environmental or social problems, despite the mainstreaming of CSR or political gridlock. Moreover, if any regulators are lulled into thinking they shouldn’t strictly interpret and enforce existing laws, because businesses are being good on their own, or are too close to those they regulate, CSR pros would be among the first to call for their heads.

Myth #3: Where private profits and public interests are aligned, CSR is irrelevant
This misses the point – CSR is all about helping companies figure out how best to align and balance these interests, again in the interest of long-term profits, as well as a stronger environment and society because they’re good for business, not short term profits. Whatever the motive, companies that utilize CSR best practices have been found most profitable over the long term – and we think that’s good. There are a lot more factors involved then the premise seems to indicate, as Toyota’s Prius safety recall proved.

Myth #4: In circumstances in which profits and social welfare are in opposition, executives are unlikely to act voluntarily in the public interest and against shareholder interests.
This is not a zero-sum game and any such hypothetical circumstances, again, exist only in areas of short term profits, which admittedly Wall St. continues to push successfully. Companies focused on short term profits only, however, will likely disappear over the long term in the 21^st century, as the shift from shareholders to stakeholders continues. Long term profits are now fully aligned with society and the environment.

Matt Courtland says:

August 24, 2010 at 10:27 pm

Great job summarizing how these four common CSR myths are not aligned with the current reality of how CSR is practiced. I find the idea that CSR is meant to replace laws very confusing and believe that most CSR practitioners would prefer increased laws, which would force companies to act in a socially responsible and environmentally sustainable manner and thus realize the business benefits of CSR sooner. Thank you for your article.

Brett B says:

August 25, 2010 at 11:25 am

“…lobbying heavily to avoid new laws or regulations because they claim they can behave on their own.”

Don’t forget they also lobby for new laws or regulations (or keeping old ones) that freeze out new forms of competition.

The $7 per gallon all totaled subsidies to the oil industry are a case in point. In all those years of Texan “free marketeers” in the White House, never once did anybody suggest getting rid of oil depletion tax credits allowances subsidies.

http://www.thenation.com/audio/154037/breakdown-what-true-cost-gas

In fact, newly published investigative journalism books based on declassified documents suggest that JFK and RFK got got themselves in serious hot water for talking about getting rid of them in 1962!

What a different energy world (and military world) we’d be living in now if we had busted up those subsidies (and the decades of amassed political power accrued to the major shareholders of those industries over our democracy).

Diddo what’s happening now with efforts to change FDA rules against nutritional supplements. Paid for by guess who?

George Clare says:

August 25, 2010 at 11:49 am

Your myth busting is sound. The problem is with Myth #4, where the question is whether or not the global economy, indeed, humanity as a whole, can withstand the damage inflicted by the short-term profit companies prior to their demise. How can CSR accelerate the downfall of the short-termers to minimize the damage?

KJ Janowski says:

Looking at business through a CSR “lens” can help companies identify long-term market opportunities, plan for the future and benefit shareholders.

Karnani’s article also assumes that shareholders have no interest in a corporation’s social, environmental and governance responsibility and this is not the case. Socially responsible investment makes up more than 1 in 10 dollars invested in the US market. Moreover, we could site numerous studies connecting sustainability focus with better stock market performance, including AT Kearney’s recent study on “’Green’ Winners: the performance of sustainability-focused companies during the financial crisis.” See http://www.atkearney.com/index.php/Publications/green-winners.html

Ben van der Merwe says:

August 25, 2010 at 11:54 am

I’m not so sure that responsibility or responsible behaviour is something that can be enforced legally.Whilst you may be able to legally enforce a retrospective concept of responsibility I think the main challenge is to get individuals and companies to take a more prospective responsibility. An interesting example of such an attempt is the shift in South Africa’s King III, from comply or else to apply or explain.

Joyce Stoer Cordi says:

August 25, 2010 at 4:30 pm

CSR is an opportunity for innovation and reinvention — the life blood of successful businesses and the source of long-term profitability.

The old saying goes: “doing well while doing good”

The role of the regulator is to protect the public good by insuring against bad corporate actors not to arbitrate what is good business.

In the case of Toyota, US DOT acted too slowly to see an pattern among the individual acceleration event reports but Toyota found its CSR when consumers began to react.

Rahul Mitra says:

August 26, 2010 at 11:11 am

It’s not that CSR is a “replacement” for laws/regulations, but that it constitutes a first-step in practising ethical business! (i, of course, take a broad view of corporate “responsibility” here, than just one-off programs.) great post, thanks!

Lara says:

August 26, 2010 at 6:16 pm

Hear, hear For example, the latest egg scare: yes, better regulation might have helped avoid the problem, but who wants to pay extra for the regulatory system keeping their eggs safe? It makes more sense for companies that practice humane and hygienic chicken-keeping to win in a marketplace populated by educated consumers and conscientious producers.

The Cases For Corporate Social Responsibility | Cause Integration says:

September 10, 2010 at 8:22 pm

[...] A particularly eloquent post by Perry Goldschein debunks 4 myths about corporate social responsibili… brought up in the WSJ article. Here’s one: [...]

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