THE BLOG

Corporate Social Responsibility in the Noughties

05/25/2010 05:12 am ET | Updated May 25, 2011

Most CEOs agree that over the course of the last decade, it has become more important for firms to show that they are socially responsible. The definition of that may have evolved, but it has become more of a priority: in a survey of over a thousand CEOs for the Economist Intelligence Unit conducted in 2007, 34.1% thought it had been a high or very high priority in 2004, rising to over half - 56.2% - in 2007, and with nearly seven in ten - 68.9% - saying they thought it would be a high priority by 2010.

Perhaps this is because the range of social topics about which firms are expected to care has risen over the decade. The environment has moved firmly onto the agenda via climate change, deforestation, and the like, and there has been a growing awareness of the effects of globalization on international labor standards. The teenager browsing for new clothes in 2010 is more likely to understand that they are cheap in part because they are stitched for such low wages, often in Asian countries, than her counterpart in 2000 would have been. There is a greater consumer understanding that firms' behavior has social consequences. 95% of CEOs told a McKinsey survey that society now has higher expectations that firms will 'take on public responsibilities' than it did five years ago, and that was in 2006.

The case for corporate social responsibility is based on a few simple premises.

One is that firms have a genuine duty to be good national or global citizens. This cannot be dismissed, but should not be overstated.

A more common premise is that customers like firms who share their values. In this way, CSR can help a company's brand as much as any snappy advertising campaign. According to this argument, the adoption of social targets over the last decade has been driven by a pragmatic recognition that the consumers are also citizens, and will make decisions according to their values in the supermarket as much as in the voting booth.

The case against CSR is based firstly on the argument that all too often, it boils down to some cosmetic changes in the spirit of a cynical marketing ploy. The argument is that social aims are best served by third sector organizations; firms essentially exist to maximize profit, and it is foolish to think that they could be as interested in helping others as they are in that.

Some go further and argue that the burgeoning CSR initiatives of the previous decade deserve to be a peripheral concern for firms, as they muddy the focus of a firms' operation.

A third argument for the prosecution is that it is not in fact important to firms that the CSR initiatives are done, but rather that they are seen to be done for the company's reputation. Ultimately, the real social outcomes can never matter to a firm.

I think the truth lies somewhere between these two extremes. No doubt some companies' CSR is cosmetic. Certainly it is hard to see how that of arms or tobacco firms could be anything but.
But sometimes they genuinely reflect the values of management. A good example is HSBC's micro-finance initiatives, which help people in developing countries, particularly women, to start their own businesses. This sits somewhere between banking and social enterprise, and that is the strength of the idea.

One thing we can reliably say, however, is that the strongest, most enduring CSR projects are likely to be those which align the best with the existing values and aims of the company.

Azeem Ibrahim is a Research Scholar at the International Security Program, Kennedy School of Government at Harvard University and a Member of the Board of Directors at the Institute of Social Policy Understanding.