Archives for October 2008

This post is a response to David Vogel’s article “CSR Doesn’t Pay” , published on forbes.com on 16th October 2008.

Before writing it I checked out who David Vogel is. He holds the Solomon P. Lee Distinguished Professorship in Business Ethics at UC Berkeley Haas School of Business.

Wow, not someone who I’d readily cross swords with. However, he has his views and I have mine. We disagree. And here is why…..

What Is CSR?

Corporate Social Responsibility (CSR) is all about ensuring businesses do not forget the social cost of their pursuit of financial profits.

A horrendous, but thankfully rare example would be that of Chevron in the Amazon Rainforest where the company extracted oil for the massive North American petrol market.

They left behind them a poisoned ecosystem, drenched with chemicals and thoroughly unusable. Their methods would not have been tolerated in their target market but the company’s primary concern was, it appears, the cost of the operation not the health of those involved or the legacy it left behind.

CSR is about taking responsibility for your actions. Instead of recognising the need to clear up this mess and take action Chevron has consistently ducked the issue and tried to get others to shoulder the burden.

The core of the CSR agenda is to get companies to understand the ramifications of their actions and plan for them ahead of time, not try and ignore them or sweep them into dusty corners when things go wrong.

What CSR Is Not

There are three very important things that CSR is not.

It is not about philanthropy. The general giving of wealth to help needy, social or community programmes should be applauded to the rafters. However, it has nothing to do with responsibility.

Neither is it about the export of values. For example, the western garment industry relies in part on the nimble fingers of children to do the most delicate works of stitching and embroidery. Theirs is a different cultural, social and economic situation to the West’s; the two should not be homogenised.

Finally, CSR is not and never has been about making money. It is about treating the people who work for a company and the community within which it operates with respect.

Money only comes into it because businesses have, by definition, to be able to cover their costs. So CSR should not, without good cause, result in a company making a loss. That is different to CSR making a profit.

What Did Professor Vogel Say?

The Market For Virtue Frontcover

Professor Vogel starts the Forbes article brightly, stating that there’s a lot of buzz about CSR and how it will make a company more profitable. This, he wishes to say, is hogwash and most of the rest of the CSR community will agree with him.

However his rationale for wishing to destroy this myth is jaw dropping:

There is a “‘market for virtue,” but it is a very limited one. Nor is it growing.

I was so taken aback I had to read this several times just to make sure I had read it correctly. Still unconvinced that I’d understood the argument correctly, I went and leafed through a list of his publications.

Included in these from 2006, is “The Market for Virtue: The Potential and Limits of Corporate Social Responsibility”. An extract from this book states:

There are important limits to the market for virtue. The main constraint on the market’s ability to increase the supply of corporate virtue is the market itself … There is a place in the market economy for responsible firms. But there is also a large place for their less responsible competitors.

So no, I hadn’t misunderstood. Professor Vogel considers CSR to be a commodity, something to be valued and traded. Having taken this in and fully digested it, I wasn’t too surprised to find the Forbes article continued:

Part of the reason why CSR does not necessarily pay is that only a handful or consumers know or care about the environmental or social records of more than a handful of firms. “Ethical” products are a niche market: Virtually all goods and services continue to be purchased on the basis of price, convenience and quality.

What’s Wrong With This?

For starters, I’m rather shocked that Professor Vogel has chosen to make CSR synonymous with “virtue”, a word loaded with overtones of morality and righteousness.

No one is suggesting that businesses should replace spiritual organisations as the ultimate paragons of virtue. To say that they are, when the only purpose is to knock the suggestions down, seems self serving and base.

Then there’s the market. Professor Vogel states in the article:

The market has many virtues, but reconciling corporate goals and public purposes is unfortunately not among them.

Good. In that case let’s be clear. CSR is not a “niche market” … it’s not about making profits or being financially valued. In fact, it’s the very antithesis of this.

It is a public purpose. It is something which is necessary for the greater good of all mankind. It’s about ensuring the pursuit of financial value doesn’t get put before caring for our fellow humans and our environment.

The Future Of CSR

In the quote above Professor Vogel states that consumers don’t know or care about the intricacies of CSR. They don’t know or care about the intricacies of financial reporting either, but that doesn’t stop it being important.

The truth is that this commoditisation of CSR has come about because businessmen are desperate to try and stave off regulation in this area. They’re trying to fit something into the market which doesn’t belong there.

If Professor Vogel is a leading CSR academic then he needs to be listened to. If the market cannot take on board CSR then the only option is far reaching and robust legislation.

Professor Vogel’s alternative, to allow some companies to be more irresponsible than others, is like saying we can have some politicians who are more corrupt or some businessmen who are more fraudulent. This is unthinkable.

At the bottom line there is no room in the advancement of human decency and respect for any talk of money. On the other hand, to suggest there should be a market in selling human misery sounds awfully like an argument which leads to slavery to me.

Picture Credit: “Haas Business School” by toolfan.hess from Flickr under Creative Commons Attribution License.