Last updated: Jan 2007

 

In November 2006 the Oxford-based campaign group Corporate Watch published an important critique of Corporate Social Responsibility (CSR). This short feature has been extracted, with permission, from the report.

 

 

Defining the concept

CSR describes the principle that companies can and should make a positive contribution to society. CSR is the practice of managing the social, environmental and economic impacts of the company, being responsive to 'stakeholders' (those who are affected by a business operation) and behaving according to a set of values which are not codified in law. In practice the term can refer to a wide range of actions that companies may take, from donating to charity to reducing carbon emissions.

By CSR here we refer to the practice of major companies, rather than 'ethical pioneers': smaller companies which are set up with social and environmental concerns as their primary motivation in doing business. Companies engage in CSR because, for a number of reasons, they think it will be good for their profit margins. The business case for CSR emphasises the benefits to reputation, staff and consumer loyalty plus maintaining public goodwill.

BP's strategy of appropriating the language of environmentalists and positioning itself as a socially responsible company on the issue of climate change by buying up a solar company (for a fraction of the amount it spends on oil acquisitions) is a clear example of a company attempting to take leadership of an issue where it finds itself criticised.

 

The evolution of CSR

The rise in anti-corporate activism over environmental and human rights issues made a shift in corporate attitudes towards social and environmental issues essential. The 70s and 80s saw major international boycotts of companies investing in South Africa, notably Barclays Bank, and the Nestlé boycott over the company's aggressive milk formula marketing strategies in the global South.

The 1992 Earth Summit in Rio was a key moment in the evolution of CSR as corporate involvement succeeded in impeding the Summit's ambitious task to 'find ways to halt the destruction of irreplaceable natural resources and pollution of the planet.' Proposals put forward by Sweden and Norway for regulation of multinationals were crushed in favour of voluntary corporate environmentalism. [1]

 

Capitalism with a human face?

The anti-corporate backlash reached a climax in 1995, as the spotlight turned on Shell. That year the company stood accused of complicity in the execution of Ken Saro Wiwa and eight other activists in Nigeria, as well as being hounded by Greenpeace over the decision to sink the Brent Spar oil platform.

Shell temporarily lost the confidence of investors and the public, and woke up many in the business world to the importance of their public reputations and the ability of campaigners to damage them. A strategy to convince the public that corporations played an important and meaningful role in society was essential.

Capitalism had to be given a human face. Step forward CSR. Shell became the first major company to publish a Corporate Social Responsibility report 
in 1998. [2]

The involvement in the report of environmental consultancy SustainAbility, [3] who had previously been critical of Shell, was key to the re-brand. The £20 million strategy was successful in rebuilding the company's reputation amongst key opinion formers and decision makers. [4]

So, CSR came as a direct response by corporations to anti-corporate activism and the damage to reputations campaigns were able to cause. It represents a success for corporations in resurrecting their public image and colonising the issue space around the social and environmental impacts of business.

 

From CSR to corporate accountability?

The 1990s saw CSR become an established industry but in 2001 the collapse of Enron, once a paragon of CSR, showed just how deeply a corporation's claims of social responsibility can differ from the reality. However, the main concrete change brought about by the episode - the introduction of the Sarbanes Oxley Act in the USA - centred on protecting investors, with no substantive change on the issue of companies' wider social impacts.

The 2002 World Summit on Sustainable Development marked the crowning of CSR. Friends of the Earth led calls for a Convention on Corporate Accountability, [5] instead the summit's agenda shifted from 'corporate regulation' towards a 'multilateral agreement', to developing a 'framework', finally to simply 'promoting best practice'. [6]

The calls for corporate accountability continue to grow with campaigns such as International Right to Know Campaign in the USA, the CORE Coalition in the UK and other initiatives internationally pressing for more legally binding rather than voluntary regulation.

 

Can a company be socially responsible? 

The problem isn't simply that companies aren't practising CSR very well, it's that the corporate structure is not capable of social responsibility.

Responsibility suggests responsiveness, obligation, control, authority and a duty of care. [7] So is the word really appropriate in this context? Through CSR companies seek to engage with stakeholders, but without implying a duty to respond. The scope of a company's 'responsibility' is therefore self-defined rather than socially defined. Furthermore, it cannot be measured, so value can be assigned arbitrarily: perfect PR.

Company directors are legally bound to act solely in the best interest of their shareholders. If profits are primary, what happens when tackling social or environmental problems does not support economic growth?

 

The real face of Corporate Social Responsibility

The corporations frequently held up as leaders in CSR, such as Shell, BP and British American Tobacco, are far from being socially responsible companies.

Two other companies which consistently top the CSR tables are Alcoa and Toyota.[8] Alcoa is the company which, in the face of unprecedented local opposition, is building an aluminium smelting plant in Iceland powered by a hydro-electric dam which will flood vast swathes of Western Europe's last pristine wilderness, and is claiming that this is a socially and environmentally responsible venture. [9]

Toyota, the world's second largest automotive manufacturer, hangs its corporate environmentalist image on its Prius hybrid which emits less greenhouse gases than the standard car. Its fuel guzzling SUV models, however, are amongst the company's biggest sellers and massively outnumber sales of hybrids. [10]

If these destructive companies are the leaders, then what does that say about those lagging behind?

 

CSR - who really wins?

CSR has ulterior motives. CSR sells. By appealing to customers' consciences and desires CSR helps companies to build brand loyalty and develop a personal connection with their customers. CSR also helps to greenwash the company's image, to cover up negative impacts by saturating the media with positive images.

A prominent case against Nike in the US illustrates this point. When, in 2002, the Californian Supreme Court ruled that Nike did not have the right to lie in defending itself against criticism, chaos ensued in the CSR movement. When the company was sued over a misleading public relations campaign, Nike defended itself using the First Amendment right to free speech. The court ruled that Nike was not protected by the First Amendment, on the grounds that the publications in question were commercial speech. [11]

Objections to the ruling were submitted to the Supreme Court by leading multinationals, arguing that if a company's claims on human rights, environmental and social issues are legally required to be true, then companies simply won't continue to make statements on these matters.

 

Market solutions

Through CSR, companies are seeking to propose solutions which fit within a market-centred worldview. Many pressing social and environmental problems have very clear, though complex, solutions - such as reducing consumption, paying a price that reflects true costs and extending regulation.

If society's primary approach to tackling major social and environmental problems is to enable the powerful interests that caused the problems to profit from their resolution, then the very intention of solving these problems is subsumed to the interest of profit.

 

Challenging corporate power

Ultimately the debate around CSR comes down to whether corporate power can be curbed or whether we should content ourselves with trying to win the smaller victories on the micro level, and whether the two efforts are mutually exclusive.

While smaller scale changes could be achieved with CSR, we will never achieve a just and sustainable society without dealing with the structural issue of corporate power and the corporate profit motive. The question is, can CSR be seen as a step towards that goal or does it hinder efforts to dismantle corporate power?

Since companies cannot act in any wider interest than the interest of their shareholders to make profit, CSR is of limited use in creating social change. Since CSR is also a vehicle for companies to thwart attempts to control corporate power and to gain access to markets, CSR is a problem not a solution.

Efforts to control corporations' destructive impacts must have a critique of corporate power at their heart and a will to dismantle corporate power as their goal, otherwise they reinforce rather than challenge power structures, and undermine popular struggles for autonomy, democracy, human rights and environmental sustainability.

 

Further reading

The Corporate Watch report "What's Wrong with Corporate Social Responsibility?" is available from their website or for £3 per copy inc. P&P from Corporate Watch at: 16B Cherwell St. Oxford, Oxfordshire OX4 1BG Tel:+44 (0)1865 791 391

   

References

1 Kenny Bruno 'The Corporate Capture of the Earth Summit' Multinational Monitor vol 7 Jul/Aug 1992.
2 Shell 'Profit and Principles - Does there have to be a choice? The Shell Report 1998'
3 Ibid p 46
4 Ibid. p128
5 Friends of the Earth International 'Towards Binding Corporate Accountability' 5/10/01
6 Christian Aid, 'A World Summit for Business Development?' 2002
7 http://dictionary.cambridge.org viewed 12/12/05.
8 Toyota and Alcoa, along with BP, come top in the 'Global 100 Most Sustainable Corporations in the World' listings by Corporate Knights and Innovest Strategic Value Advisors. www.global100.org
9 Susan de Muth, 'Power Driven' The Guardian 29/11/03. For more information see www.savingiceland.org
10 With projected sales of 240,000 hybrids for 2006, the Prius accounts for less than 3% of the 9.06 million cars Toyota has predicted it will produce in 2006. http://www.iht.com/articles/2005/12/20/business/toyota.php). In 2004, Toyota exported over three times as many RAV4's, a model in its Sports Utility Vehicle range, as it did Priuses (Toyota, 'Toyota in the World Data book' March 2005
11 Full details of the case of Nike vs Kasky can be found at //www.reclaimdemocracy.org/nike/

 

From Ethical Consumer, Issue 104, January/February 2007

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