Over and over again at the Graziadio School of Business and Management I hear the refrain from students that they are interested in sustainability or corporate social responsibility as a career. These phrases have left many MBA candidates captivated, here and on other campuses across the country. Indeed, it seems to be the hot topic in business for this era; much like strategic management was for the 1990s. The fact that so many students are aiming to work in a field that sounds well, dubious, is a cause for concern. How did we get here?
Corporate social responsibility "¨ or CSR, as they call it "¨ is supposed to be a way for companies to measure and monitor their impact on the wider world. Every layer of society "¨ the ethical, legal, environmental, and political realms "¨ is relevant in assessing how a firm operates. The ultimate goal is to create a certification system that quantifies performance in these areas. Hand-in-hand with this is the stakeholder theory, a concept which proposes that the purpose of a business is to serve the variety of interests which have stakes in the company: shareholders, employees, customers, suppliers, as well as communities and governments. The stakeholder model upends the two established notions of business purpose "¨ creating profit for the owners and, as Peter Drucker formulated, creating and keeping a customer.
Corporate social responsibility and the stakeholder theory are radical departures from the traditional ways of understanding business. These ideas don't go so far as to venture to replace them, but in some cases they can be weighted equally. Indeed, Triple Bottom Line analysis claims to account for the firm's contribution toward people, planet, and profits. Students frequently list it is a qualification on their resumes.
Have these business students suddenly gotten altruistic or uninterested in creating wealth? Has an army of do-gooders swarmed our schools? Maybe. But more than anything else, the whole thing appears to be a product of our times. The current crop of degree-takers came of age during the Enron scandal, a cauldron of fraud, deception, and expertise that confirmed the worst impressions about American big business. The other crackups following it "¨ including a chief executive's $6,000 shower curtain and Martha Stewart's lying to the feds "¨ brought to the forefront a layer of seaminess and self-regard. It prompted business schools to roll out courses in ethics with these case studies in mind. Corporate social responsibility expanded upon this by looking beyond the individual to the company, and asking us to consider its behavior.
There are several things wrong with this. By switching the focus from the person to the firm, the CSR movement confuses things. Companies aren't living, breathing things; the people inside them are. Borrowing on another field in business academia, organization behavior, CSR chalks up such wrongs of pollution, mass layoffs, and price gouging to the firms per se rather than their leaders. In essence, they argue that the purpose and perspective of the firm is out of whack, a far wider claim than blaming the people in charge. It's the corporate social responsibility experts' role, then, to come in and adjust that.
Sustainability also ignores the old truth that what goes around comes around. As a finance professor recently told my class, "∫What happens when a company starts to mistreat its customers, treat its employees like dirt, abuse its suppliers, and make the world a worse off place? That usually gets out to the public, and it has an effect on sales." People, planet, and profit are ultimately aligned. As the standard of living rises, consumers have higher expectations for how their purchases affect the world around them. Companies that have faltered in this regard, such as Nike, have paid the price on the real bottom line.
As much as some firms like Nike and Wal-Mart have found themselves in the crosshairs of the CSR movement, big businesses do have an inherent advantage: their size allows them to co-opt it. They have the resources to open sustainability shops, mint public relations campaigns, and cut deals with government over how they will confirm to new regulation. This faux kind of good behavior takes the pressure off the true operation of the business to be up to par.
More than the swirl of corporate scandals, I think the financial boom and bust have encouraged schools and students to carve out the sustainability niche. Because of the availability of cheap debt, leverage played a vital role in the two cycles. This put the financial sector squarely in the center of the rise and collapse of the U.S. economy. The way so many financiers, most of them MBA-holders, played this game "¨ with a single-minded focus on winning and lack of concern for the big picture "¨ pushed some of the socially-minded to draw up a new playbook with different rules and results.
As the economy deleverages and finance plays more of a supporting role in the next growth cycle, the traditional components of American business will return to center stage. The ones who have the most stakeholders will be best positioned to work through the challenges of meeting their expectations, i.e. of being socially responsible. Isn't that what the best businesses have always done anyway? They don't need a special field of study to tell them how. As it turns out, corporate social responsibility isn't anything new under the sun.
No related posts.
hello rich, this is a very interesting analysis and there is some truth in what you say, I believe. But there is also another set of truths which counter the points you make: Being socially responsible is NOT what businesses have always done anyway ! This is so far from the truth that it amazes me actually to read this sentence. Obeying the law and not telling outright lies, and/or writing a cheque to support the local community,well, this is baseline and doesnt even begin to approach the current challenges of CSR. Applying advanced principles of CSR is not something you do instead of making money. It is the way you ensure your capability to make money over the long term. And finally, CSR does not absolve all people in the business of reponsibilty – it is only when ALL people in the business apply their personal commitment to CSR that the business can reap the benefits. There are many ways in which corporations with a CSR approach gain benefit in risk management, developing new opportunities, enhancing reputation and more, and all of these factors contribute to more positive business performance over time. My advice to you would be instead of denying the need for a professional, structured and planned approach to CSR, to get to understand the true benefits and professional discipline required. Maybe you will want to becone a Corporate Responsibility Director one day after all!!! (disclosure – i am a consultant, supporting businesses developing CSR strategy, practices and transparency through reporting, so you may feel my remarks are biased. They are, because this is the experience i have with my clients).
Thanks for making me think about things, though!
elaine
http://www.b-yond.biz/en
http://www.csr-reporting.blogspot.com
I’m afraid a point-by-point refutation is beyond the scope of this board, but you’d be better advised to read a bit, start with the Harvard Business Review’ June 2009 issue, (Page 62), before you post such thoughts. I will limit myself to 2 observations: if your thinking is a product of your business school, then the recent crisis obviously hasn’t happeneds; and for your future employers should note that you show a remarkable inability to grasp the emotions and feelings of the times.
Go well.
Richard Danker wrote an incredibly powerful article and make very notable points. In some respects he does not go far enough. I am sorry Mark could not enlighten us with his statists objections.
CSR is a marxist ploy to shake down corporations to fund their otherwise unfundable activities. Let’s take Acorn, a marxist front group, has been shaking down corporations for years, while its board of directors have been embezzling the contributions. It is amazing that Acorn was given millions by Bank of America, Chase and Citibank. That is only to name a few corporations that gave money to this corrupt organization. Acorn would go around and say that they were for the people and they were for the poor. Yeah, right. Think how many honest people could have been employed if the CSR blackmailers weren’t around. That’s really the main point. For every dollar a corporation gives to CSR causes is one less dollar they have to hire a new employee, expand their business (which will employee more people), or pay down debt (so that they don’t go out of business or need a bailout).
If the individual shareholders or employees want to donate part of their salary, they should be able to do so. I am not against charity. I am all for it. I think it should be done on an individual basis. But for the top executives to make those decisions, it is wrong. Milton Friedman said it best, “there is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say , engages in open and free competition, without deception or fraud.”
Pingback: Corporate Social Responsibility is redundant
Very interesting article, I think more businesses need to understand that they do have
social responsibility to the workers, customers and environment. Yes profits are very important
but if they truly understood the concept it goes hand in hand with increase profits
Hi Rich –
I laud you for putting it out there — and while I find your passion compelling, and agree with a subset of your points, I find thick strands of your argument incoherent, and at times — sorry to say this — puerile.
Are you open to another point of view? If so, I’d highly recommend you seek out Chris Worley, Ann Feyerherm, and/or Terri Egan — all three are Graziadio professors. Or call me — you can find the number on my website, http://www.asustainableway.com.
All the best,
Brad
Would someone please tell me what is socially minded about following like a bunch of lemmings the poppycock science of global warming. It is amazing that I read such drivel coming from such intelligent people. Should we not investigate and question what were are being told? Or are we sheep and must follow the herd. If you agree we are sheep, then please, why did you spend your time and money getting a MBA?
Let’s take the example of recycling. Most companies are encouraged to recycle because it is suppose to save the planet. So, it falls under CSR. Let’s take an in depth look and we’ll see that recycling is not in fact CSR. The opposite is true. Another words, if a company is to be truly socially responsible, it should stop recycling.
To bolster my argument, I have included excerpts from Floy Lilley of the Mises Institute.
“Recycling itself uses three times more resources than does depositing waste in landfills….
Glass is made from silica dioxide " that’s common beach sand " the most abundant mineral in the crust of the earth. Plastic is derived from petroleum byproducts after fuel is harvested from the raw material. Recycling paper, glass, or plastic is usually not justified compared to the virgin prices of these materials.”
“The best way to measure the scarcity of natural resources, such as trees, sand, or oil, is to use the market prices of those resources. If the price of a resource is going up over time (and it’s not just inflation pushing those prices higher) the resource is getting scarcer. If the price is going down, it is becoming more plentiful. Indeed, since 1845, the average price of raw materials has fallen roughly 80 percent after adjusting for inflation.” In other words, we are not running out of trees, oil or sand. So why conserve?
“This paradox of our having more by using more is explained by the use of the most important resource " man’s mind. Human ingenuity makes natural resources increasingly available through prices, innovation, and substitution.”
So, in the case of recycling, it appears to be counter productive with the exception of scrap metal.
San Francisco recently implemented new recycling regulations that will do nothing more than drive up costs and expand the size of an already bloated government bureaucracy.
“San Francisco residents will be issued three mandatory garbage bins: a black one for trash, a blue one for recyclables and a green one for compost. Garbage collectors who spot orange peels or aluminum soda cans in a black trash bin will leave a note reminding the owner how to separate his trash properly. Anyone found repeatedly flouting recycling protocol will be issued fines of $100 for small businesses and single-family homes and up to $1,000 for large businesses and multiunit buildings.”
Businesses will be burdened with ensuring that their employees separate their Chinese takeout from their waste paper and that their soda cans are not mixed in with their Chinese takeout and waste paper. Such legislation will invariably drive up costs in terms of labor hours, fines and recycling program implementation and training. As a result, there will be less money for growing the company, for hiring more employees, raising salaries and increasing benefits. How socially responsible is that?
This is why we must think, question and investigate what is being forced upon us. Is this not why we have pursued a higher education?