Proponents of capitalism will often argue that companies have come a long way in adopting corporate social responsibility (CSR) in the last fifty years. They will point to the roughly 2500 corporate foundations that assist charities and non-governmental organizations working on the ground to save lives and improve conditions for the poor and destitute. They will talk about scores of creative cause marketing promotions that have inspired consumers to purchase products where a portion of the price serves as a donation to a cause – campaigns like Yoplait’s Lids to Save Lives and Pamper’s offer to pay for a tetanus shot for a pregnant mother in Africa for every package of specially marked diapers sold. And they will proudly point to the fact that corporations donated about $14.1 billion in charitable donations in 2009.
But as we step into the second decade of this 21st century, it is reasonable to ask a question: Are these CSR efforts sufficient to accomplish the goals that we expect of the corporate world, given the stature and role that corporations play in society?
This issue needs to be raised because if we don’t question it now, the level of CSR effort we currently receive from corporations will continue into the future simply through the tacit approval we give by not questioning it now.
The current level of CSR efforts is insufficient, and we must act to increase it substantially in many ways. We can point to 7 reasons why corporations are not pulling their weight relative to the resources they consume and the returns they give society:
- CSR generosity is disproportionate to profits and salaries. Corporations may donate $14 billion to charities, but this amount is small when compared to the hundreds of billions reserved for investors and the salaries and bonuses of individual CEO’s and executives. In fact, the average corporate donation to charitable causes is only about 1 percent of its total pretax profits and it rarely exceeds 1.5 percent. There is certainly room for growth here, given that highly ranked CSR companies tend to give more like 5% and as high as 10% of their pretax profits.
- Top executives are often uninvolved or insincere about their social responsibility. There is a serious gap in what corporate leaders say about their commitment versus what they do. For instance, consider what executives say and do about sustainability, which is clearly an important measure of social responsibility. In a 2010 McKinsey survey of nearly 1800 respondents, more than 50 percent of the executives said they consider sustainability to be “very” or “extremely” important in a wide range of areas, including new-product development, reputation building, and overall corporate strategy. However, only 25 percent of them agreed that it is a top priority for their CEOs, and only 30 percent said their companies invest in sustainability or embed it into their business practices.
- Companies often plead ignorance about CSR: The private sector frequently appears to hide behind claims that it is confused about social responsibility. For instance, the McKinsey survey cited above shows that 20 percent of executives say their company has no definition of sustainability, while 55 percent think it has to do with the management of environmental issues, 48 percent think it relates to governance issues (ethics and compliance, regulations) and 41 percent believe it is about social issues such as working conditions and labor standards. This lack of understanding is baffling, given decades of government efforts at passing regulations, pressure from consumers, media attention, and entire MBA programs devoted to the topic of CSR.
- CSR efforts are often used as “window dressing”: Despite an evolution of CSR from the 1950s, most companies approach it as a means to enhance their corporate reputations. The notably conservative Economist magazine characterized the corporate world’s approach to CSR in this way: “For most public companies, CSR is little more than a cosmetic treatment. The human face that CSR applies to capitalism goes on each morning, gets increasingly smeared by day and washes off at night.”
- Companies often “wash” their CSR and CRM promotions: Many companies say they are green or donate to causes only to be discovered after the fact to be green-washing or cause-washing. For them, CSR is a marketing ploy they attempt to get away with for as long as possible.
- CSR results and measurements are scattershot: The fact is few corporations measure their CSR results, which is a sign that it is unimportant to them to make a real difference in the world as long as consumers think they are giving out money. Up until recently, no standards have really existed such as those created by the U.N. Millennium Development Goals to demarcate whether corporations were achieving any measurable achievements to help the world.
- CSR has only grown because citizens and government have pressured companies. This is the most significant reason we cannot accept that corporations are doing their best and, more importantly, will try to do better in the future. From the Great Depression to the present moment, the main reason companies have become involved in CSR is that they have been pushed into by citizens and consumers, or in some cases, because companies realized they could make a profit on CSR. In the 1950s and 1960’s, for example, it was the opportunity to enhance their reputation with consumers and citizens that drove companies to donate to cultural charities like museums and symphonies. In the 1970s and 1980s, it was enlightened self-interest that led companies to invent cause marketing that guaranteed them a sale for every donation they made. In the early 2000s, it was public outrage at the unethical behaviors of companies like Enron and WorldCom that forced companies into adopting new standards of ethical conduct. Indeed, the rise of the Internet and social media are the strongest factors that have driven corporations to expand their CSR. Only since the 1990s when consumers had the ability to tap into the web to research corporate transgressions, fraud, and manipulation have companies truly started to be more transparent and honest about their social responsibility efforts. Today, the twittersphere and bloggers have helped birth a new class of professional citizen activists and watch dog agencies that devote themselves to exposing corporate irresponsibility. In effect, were it not for the steady and committed actions of citizens and consumers, one might wonder if corporations would have embraced any willingness to accept social responsibility at all.
The Need for Ongoing Consumer Pressure
In the end, we need consumers to keep up the pressure on companies to take on higher levels of CSR. We cannot relinquish to corporations the ability to reduce or avoid their appropriate role in society given how they benefit and the impact have (pollution, deforestation, disparities of wealth and opportunity, depletion of resources, and so on). We should applaud corporations for the progress they have made and encourage them to continue building on it, but we should remain vigilant in insisting that, as a society, we cannot accept the false premise that corporations are not responsible to anyone but their shareholders.
Simon Mainwaring is the founder of We First, a social branding consultancy that helps companies, non-profits and consumer groups build a better world through changes to the practice of capitalism, branding, and consumerism using social technology. More information about contributory consumption and the GBI is available in We First: How Brands and Consumers Use Social Media to Build a Better World (Palgrave/Macmillan, June 2011). Or visit www.wefirstbook.com