It is fashionable for large businesses to put significant resources into Corporate Social Responsibility (CSR) programs. They dedicate staff and money to worthwhile causes. They tell stakeholders and applicants how responsible and caring they are. They can boast about their worthy projects. It all makes for good PR.
Maybe businesses should focus on what they are good at and stay out of dabbling in worthy causes. Why? Well quite simply, if an oil company does an excellent job at extracting, refining and delivering oil products then it will fulfill its obligations to society. It will employ many people – who all pay taxes. It will give business to many suppliers. It will pay corporation tax. It will boost the economy and fund the taxes and social programs of the elected government.
We would not expect a school, a hospital or a police force to put their scarce resources into CSR programs. They should focus on educating pupils, helping the sick or catching criminals. So why do we expect banks and pharmaceutical companies to divert resources into ‘good causes’? Shouldn’t they leave that to the organizations dedicated to those causes?
Of course businesses should act ethically. They should treat their customers, their employees and their suppliers well. They should take care with the environment they affect. This is all good business practice that helps corporate improve the performance. Consider this. A bank spends $10m on building a nature reserve in its CSR program. If that $10m went into profit instead then it would pay an extra $3m in tax – which would pay for more teachers, nurses and policemen. It would pay say an extra $3m in dividends – which would be better for shareholders and pension funds paying pensions. It would retain say an extra $4m for investment in research or innovation or to strengthen the reserves. Where does the $10m serve society better?
Is CSR a worthwhile focus for corporate time and effort or is it a palliative, a smokescreen and a distraction? Perhaps businesses should do well what they do well and leave doing good to the proper agencies.
Hi Paul
Thanks for your thoughtful piece raising an important question.
I agree with your statement: “Of course businesses should act ethically. They should treat their customers, their employees and their suppliers well. They should take care with the environment they affect. This is all good business practice that helps corporate improve the performance.”
Since at least 2004, the most influential definitions of CSR have included all of those things. Your criticism of CSR seems to be on the basis that it is purely about giving money away, which is a very outdated view of where the current state of practice is.
That said, there is also a good business case for strategic community involvement within a certain range (people tend to suggest between 0.5 – 1 percent of pre-tax profit). There are enlightened self-interest cases for investing in public education, job creation programmes for excluded groups, including ex-offenders and homeless people, etc. There is some good research suggesting that showing genuine care for the local community plays very well with employees, makes them more likely to stay and more likely to be advocates. And, of course, if you do it right there are also reputational benefits.
Of course, you should choose investments where there will be real impact. Your example of a nature reserve above is really selected to provide a stark contrast with what the tax money would achieve. As with any other spending, it’s perfectly possible to spend community investment money wisely and to maximum impact, or not!
Best wishes – Mallen
There’s the expression, “CSR without HR is only PR”.