Beyond Corporate Social Responsibility, Part 2: Problematic Assumptions Underlying CSR

This is the second in a series of posts on why corporate social responsibility (CSR) doesn’t work and what changes we should be seeking instead. The first post in the series is here.

There are a number of problematic assumptions underlying most CSR programs that I want to critically examine here and in my ensuing posts: 1) That changes in business leaders’ norms are enough to transform how corporations work; 2) that it is always possible to create win-win solutions, where what is good for business leaders is also good for other social groups and for the environment; 3) that companies can self-regulate without checks and balances from democratic organizations such as independent labor unions and elected governments;  4) and that companies can do good by taking a paternalistic approach to the less fortunate, without fundamentally transforming the power dynamics of society.

Central to the idea of CSR is the triple bottom line, in which corporations look at not only the financial bottom line—whether their activities are profitable—but also at their social and environmental impact. Proponents of the triple bottom line argue that corporations do better over the long run when they are run in a way that is socially and ecological sustainable—that is when they foster a positive social and natural environment in which to operate. Many corporations have, of course, long practiced philanthropy, but such philanthropic efforts were done at arm’s length from their for-profit operations. CSR and observing the triple bottom line, on the other hand, are supposed to involve a transformation of a company’s core operations.

All this begs the question, however, of whether companies can make such a transformation in how they operate and of how deeply they would actually need to transform their operations to do so. Much of the literature on CSR coming out of business schools simply assumes this is the case and explores questions of implementation. But much of the literature in sociology and the other social sciences that has looked at CSR fundamentally calls this into question.

Mark R. Kramer and Marc W. Pfitzer in “The Ecosystem of Shared Value” explore what they see as some examples of successful CSR, using a variant of the idea of the triple bottom line called “shared value.” One example is the global fertilizer company Yara’s quest to build their sales among small farmers in Tanzania. Their ability to do so was blocked by the country’s lack of the necessary infrastructure in the form of a port and good roads. So Yara worked with other companies that also had a stake in building better infrastructure, international development NGOs, local civil society groups, and Tanzanian government agencies to put together the funds to build the infrastructure and the political coalition necessary to overcome the political inertia and corruption that had blocked such construction projects in the past.

There are a number of problems with Kramer and Pfitzer’s case though.

First, they don’t even address the ecological sustainability problems of conventional agriculture. Yara is not transforming their operations to be more environmentally conscientious because this would call their entire business model into question.

Second, there is an assumption that designing win-win outcomes like this is easy. Underlying this is the assumption that what’s good for large businesses is good for society as a whole. There may be specific cases, such as this one, where the interests of Yara and other businesses converged with a wide range of other groups who would benefit from better transportation infrastructure. But this is not always the case. The reason sweatshops are prevalent in so many industries from apparel to electronics is that the major companies’ business models involve holding down production costs as much as possible, a recipe for labor exploitation. A conflict between the low-paid workers producing the goods and the highly profitable companies benefiting from the workers’ exploitation is baked into this system. It’s not that the problems can’t be fixed, but they can’t be fixed without profound transformations in how our economy is organized, something that goes well beyond conventional approaches to CSR.

Finally, there are questions of accountability. Who are Yara and other such companies to decide what Tanzania’s priorities are? This is not a question of whether they were right or wrong in their assessment of the need for better transportation infrastructure—they may well have been right. But for-profit corporations are not democratically accountable to the people whose lives they have an impact on. While often imperfect, democratically elected governments and their agencies; independent, democratic labor unions; and grassroots, membership-based civil society and social movement organizations all have avenues through which ordinary people can hold leaders accountable and shape what policies are made. For-profit corporations, on the slip side, are accountable to those who own them, whether those are private owners or the stockholders of a publicly traded firm—and their obligation to those owners is to maximize profits. For all the talk of monitoring their social and environmental impact, such companies are not democratically accountable to their own workforce or the communities within which they operate. And therefore we cannot expect them to consistently concern themselves with their needs and aspirations.

In future posts, I will explore these issues in more depth and how we might fundamentally transform businesses and the economy to foster real social and environmental responsibility.