THE CREDIT crunch confronts the corporate social responsibility (CSR) movement with its biggest crisis. Over two decades, the idea that companies should voluntarily ‘put something back’ has acquired impressive support from the great and the good.
No less than 85% of the FTSE 100 refer to CSR in their annual reports, according to one study. ‘It’s never been more important,’ runs a headline prominent on the Business in the Community website over a section on ‘Corporate Responsibility in recession’, with links to how-to articles and an awards scheme. The government also approves, appointing the world’s first minister for CSR in 2000 and asserting in a recent report that by behaving responsibly ‘businesses can make a significant contribution to boosting wealth creation and employment, fostering social justice and protecting the environment’.
Yet the financial meltdown brings a two-pronged challenge to responsibility champions. The first is simply whether sustainability and wider CSR issues will remain on the boardroom agenda. Non-government organisations and a number of other CSR observers see signs of com panies reverting to the default position that, in today’s conditions, anything other than business as business is a luxury that they can’t afford.
In truth, the ‘market for virtue’, as David Vogel put it a couple of years back in a book of that name, is in any case small and weak, particularly in capital markets, which give no sign of rewarding companies that do good with higher share prices or punishing those that behave badly with lower ones. Accordingly, while for a few companies CSR makes business sense as part of their brand and customer strategy, and others use it defensively for risk management purposes, most do it only in so far as it suits them and they can afford it. When it doesn’t suit them there’s nothing to prevent them dropping it, or perhaps cherry-picking the areas to apply it.
It may be no accident that most CSR centres on environmental issues. Doing more with less – ie, resource efficiency – and eliminating pollution before it occurs often directly benefit the bottom line (which means it isn’t really CSR, it’s just sound business). Meanwhile, green credentials may deflect attention from less visible or savoury practices. For example a number of large retailers – Debenhams, B&Q, Boots Alliance and Selfridges among others – have over the past year reportedly extended their payment period to suppliers, sometimes up to 96 days, while the Federation of Small Businesses says that 14 companies, mostly retailers, have taken to charging a 2.5% ‘settlement fee’ when they pay their bills.
While such a power play, like MPs’ lodging arrangements, may not offend literal definitions, it breaches the spirit, potentially putting many credit-starved small suppliers in danger of collapse. It also lays companies open to the charge that CSR is attractive to them because they can gloss what they do in the most favourable light, while not having to do anything they don’t want to.
But more glaring are the contradictions in the financial sector. Much like Enron, financial services have combined being a pillar of CSR with corporate irresponsibility on a grand scale. The immediate cause of today’s crisis was cynical mis-selling of sub-prime mortgages to self-certifying customers whose hope of maintaining payments in a serious downturn was minimal. Scarcely believably, the process was then repeated higher up the food chain, investment bankers re-mis-selling poisonous packages of debt to investors and other bankers, egged on by massive one-way bonus incentives.
Yet, as Ian Christie, an independent environmental consultant, notes, the CSR industry has had nothing to say about the pay and incentives issue, a crucial part of any post-crunch reform, at least in public, and if it has been conducting advocacy on it in private, it was to singularly little effect. A similar outbreak of mutism has greeted the failure of financial self-regulation – indeed, arguing against regulation is a key point on the City agenda. Christie asks: ‘Has any member of any CSR club been ejected or suspended for breach of the spirit of CSR or for flagrant irresponsibility? I think the answer is no.’
How little influence CSR is able to wield within companies was charted in a recent article in Ethical Corporation noting the imperviousness of sales teams to ethical concerns. Sometimes scornfully labelled the ‘sales prevention team’, CSR professionals were ‘completely excluded’ from debates about how to treat customers. Given the ritual obeisance to customers and the central role played by their abuse in the current crisis, this is an extraordinary revelation, kicking away any pretension CSR might have to pose as a saviour in today’s troubles. Rather the reverse: the reputational issues faced by the banks are only matched by those facing CSR itself.