THE BLOG

Ronald Reagan: The Father of CSR

03/11/2011 03:37 pm ET | Updated May 25, 2011

As bizarre as it may seem, Ronald Reagan and Margaret Thatcher conceived a love child. Today the demanding adolescent goes by a number of aliases, but most business people call it Corporate Social Responsibility.

Before you start protesting, hear me out. Reagan and Thatcher believed in the power of the market and held that even well-intentioned government intervention was misguided. The free market was responsible for creating wealth and progress in society and any hindrance to market forces was a hindrance of human progress.

In 1980, Reagan beat Jimmy Carter with a simple message: "Get government off our backs." When he took office the following year, he delivered on many of his regulatory reforms.

Reagan was responding to his business constituents' complaints that the growing litany of regulations covering environmental clean-up, worker safety, employee rights, community protections, labor policies, collective bargaining and so on, were strangling commerce. In many instances regulations and government policy proved to be costly and inefficient ways to address the identified problems.

Business leaders applauded Reagan's efforts to reign in regulatory constraints on the market on the assumption that if regulatory enthusiasm were contained, the problems for business would disappear.

Today we know that the problems regulation was trying to address didn't go away. In fact, as the economy expanded globally and world GNP got larger, so did the problems.

Counter to expectations, business has not escaped responsibility for the impacts arising from economic growth. Now, however, instead of being able to negotiate with a single authoritative body that earns its legitimacy through elections, business confronts a dispersed and demanding task master called "civil society."

Very few companies embrace CSR at the outset. Usually it is cumulative stakeholder pressures that forces companies to reluctantly adopt CSR policies. But this is the inevitable consequence of getting government off of businesses' back. Today corporations face a world of fragmented special interest groups and communities all making competing and even contradictory demands on business. With the explosion in the internet and social media, business is finding that it can't ignore civil society. Even worse, the public can't be voted out of office the way politicians can.

It's hard to avoid the truth: Ronald Reagan and Margaret Thatcher created the conditions that are forcing business to respond to the problems created by economic success, and to put CSR programs in place. The outcome of this process is exemplified in Walmart's Sustainability Index. In collaboration with interest groups, Walmart is defining what sustainability means for every product that goes on its shelves. In effect, Walmart has become the U. S. Environmental Protection Agency for its suppliers. This development can pose a lot of questions. Do suppliers want Walmart determining what sustainable frozen pizza or sustainable off-road bicycles means? Do we as citizens want Walmart and other large companies making these decisions? The sluggish uptake of CSR policies clearly shows that executives would rather not have this responsibility. But they have it, and society is now hoping that they are up to the job.