In a year when all eyes have been on the oil spill in the Gulf, automobile recalls, and the ongoing debate over behavior in the banking system, the Wall Street Journal -- inexplicably -- weighed in today by publishing a piece titled "The Case Against Corporate Social Responsibility." University of Michigan business school professor Aneel Karnani's piece was nothing more than a rehash of the arguments first made more than four decades ago by Milton Friedman. His assertion that delivering returns for shareholders is the only responsibility of business was wrong then, and it is wrong today, as even Jack Welch now acknowledges.
These arguments get trotted out every so often, as The Economist did in a 2005 cover story that it essentially recanted in 2008. Still, it is incomprehensible to me that anyone would still argue that companies considering the economic, social, and environmental impacts of their operations are making a mistake. Not surprisingly, Karnani could not provide a single example of when corporate responsibility has inflicted harm. The weak support for his arguments may be because there is such considerable evidence to the contrary. Most companies have discovered -- to their benefit and ours -- that considerable opportunity awaits companies that leverage their resources to tackle the world's biggest challenges.
I have the privilege of leading BSR, an organization that works with nearly 300 member companies -- including some of the largest in the world -- to integrate social, ethical, and environmental principles into their business strategies. In my experience, companies like GE, Nike, Ford, and Hitachi embrace corporate responsibility both as a means of advancing their commercial interests and to address big global challenges like health, energy, mobility, and efficiency. The examples of their impact are easy to come by: By developing more efficient trucks, Walmart has saved immense amounts of money while reducing its logistics costs. Nike has used sustainability to innovate new products such as those in its Considered line, which are designed with fewer toxics and waste and more environmentally preferred materials. And Unilever is using corporate responsibility to find new market opportunities for everyday products including soap and tea. What's more, new companies such as Method, and older enterprises such as Seventh Generation have built their very identities around environmental questions.
These are just a few of the cases that prove that companies focusing on corporate social responsibility (CSR) not only generate profits, they also benefit society. Indeed, if, as Karnani posits, a focus on CSR were "dangerous," we would not see so many companies reporting publicly on their corporate responsibility efforts, nor would we see so many business school students (including many of those at the University of Michigan, where Karnani teaches) flock to work for companies that embrace a social purpose along with their business interests.
The businesses that embrace corporate social responsibility are best positioned to grasp the market opportunities in our fast-changing world. Karnani does business a disservice by rejecting an idea that has great power and potential.
Professor Karnani teaches at the Ross School of Business at the University of Michigan. That's where I'll be in October, speaking at the annual conference of Net Impact, a wonderful organization that promotes CSR in business schools. I suspect that the 1,500 business students who attend the conference each year will have something to say about Professor Karnani's "case" against CSR. I wonder if the good professor will try to convince these ambitious business students that they should forsake their interest in CSR. Maybe he'll be out of town instead.
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I think it's important to remember that CSR is not embraced by companies because it's the right thing to do, but only where there is a perceived benefit with little cost. In short, it's a marketing ploy. The fact is that corporate executives are still legally bound to put shareholder interests first.
On the one hand, it is important to understand that Karnani has put voice on a mindset that is out there, whether Mr. Cramer wants it or not. For each Nike, each GE, each Ford and each Hitachi, there are hundreds of Nike-similar, GE-similar, Ford-similar and Hitachi-similar, that are still out there and absolutely not aware of their strategic choices. Absolutely not aware that, by doing nothing, they are already choosing. Karnani doesn't clarify the persona that he is trying to describe through his notes, leaving the impression that his notes reflect his beliefs.
On the other hand, I follow BSR activities for long time and understand their progress in the consulting and advocacy fields. If nobody said out loud: "hey, there are 5 billion people out there with absolutely no freedom, locked in a world of consumerism and poverty", who would go change anything? I respect BSR for their mission and drive.
Corporate strategy is the mastery of making choices, and CSR is one of those choices. Karnani is challening to get an answer: is CSR essential for shareholder value?
I was recently inspired by the new book “More Than Promote” (John Rooks) that paints a compelling model for triple ROI marketing that delivers corporate, civic and cultural value. If 60% (according to Edelman) of Americans expect corporations to play a greater role both in bettering society and making it easier for individual consumers to do their part, the outlook for More than Promote is promising.
Newer initiatives like the P&G Give Health Blogivation (disclaimer: my company, Changents.com is a partner in this program) are the beginning of what will be a shift in turning consumerism into citizenship. It is not profits or social return, it's both, reinforcing each other.
CSR Vault also makes some great points on the WSJ article that are worth checking out (http://www.vault.com/wps/portal/usa/blogs/entry-detail/?blog_id=1462&entry_id=11749).
Thank you again for the thoughtful comments.
Deron Triff
CEO
Changents.com
Deron Triff, CEO Changents.com
On the other hand listen to Timberland's CEO talk about "seducing consumers to care" about his CSR reports - sounds like buyers' remorse to me:
http://www.huffingtonpost.com/jeff-ballinger/ask-workers-in-cambodia-a_b_659063.html