Corporate Social Responsibility (CSR) is deeply flawed, but is there a viable alternative to guide policymaking?

The Guardian recently reported on an examination by researchers at Leeds university of more than 4000 CSR environmental reports and company surveys. They found that many of the reports contained “irrelevant data, unsubstantiated claims, gaps in data and inaccurate figures.” In one example, a company’s carbon footprint exceeded the entire world’s by four times. More endemic problems included companies neglecting data from individual countries or subsidiaries, which often skewed the figures when those countries were China and Brazil - huge emerging economies. BT, for instance, reported zero energy and water use, and waste and transport for many of its international operations in 2007.

Importantly, this was not simply a result of corporations deliberately and manipulatively distorting figures to mislead the public and policymakers, but perhaps more fundamentally a reflection of the disconnect between social outcomes and business strategy:

Although some of the howlers were clearly mistakes rather than attempts to distort the picture, they were wrong by such enormous factors, and sometimes for several years in a row, that it suggested they were not being read properly or taken seriously by staff inside the company, said Dr Ralf Barkemeyer, a lecturer in CSR at Leeds.

This underscores the fundamental problem with CSR initiatives - they often simply aren’t high on the list of a company’s priorities . They’re more often a function of the marketing or PR department, rather than an element of a company’s core business strategy. This may perhaps explain why staff within the companies examined by the Leeds report apparently paid insufficient attention to the integrity of CSR data. It may also be why a number of highly criticised companies - such as British American Tobacco - have been named as ‘leaders’ in CSR reporting.

Conventional CSR approaches have been strongly criticised by many - from the RSA’s chief executive Matthew Taylor to Harvard Business School professor Michael Porter. The latter’s concept of Creating Shared Value (CSV) was explicitly devised in response to the inadequacies of CSR. In January 2011, Porter and Mark R. Kramer, writing for the Harvard Business Review, noted:

Even worse, the more business has begun to embrace corporate responsibility, the more it has been blamed for society’s failures.

The Leeds report is the freshest evidence of this trend.

Porter’s shared value concept, as well as Matthew Taylor’s notion of ‘enlightened enterprise’, moves beyond CSR by reconnecting business and society through placing social progress - in combination with traditional shareholder value - at the core of business strategy, rather than at the periphery. Several big companies, including IBM, Google and Nestle are already incorporating elements of shared value. Even in India, a country that has notoriously achieved rapid economic growth but very little social mobility (it is ranked 134th on the Human Development Index), many key companies are moving beyond conventional models and implementing shared value principles, according to a recent report by FSG. By re-conceiving products and markets, redefining productivity in the value chain (to emphasise sustainability) and enabling local cluster development, Porter and Kramer and others persuasively argue that businesses can create shared value and find profit-making opportunities in addressing social and environmental problems.

But thus far, there are relatively few concrete developments in policy terms supporting such a paradigm shift. While Government figures such as Vince Cable and David Cameron have urged businesses to be more ‘socially responsible’ and contribute to the ‘Big Society’, there is very little direction coming from Whitehall - and this was a key concern expressed by many participants in a recent roundtable about new government-business-society thinking hosted at the RSA by the 2020PSH.

On one level this is understandable - concepts such as ‘shared value’ are market-oriented; designed with the recognition that Government is unable to meet all of society’s challenges, and that more needs to be achieved within a market framework by companies themselves. To an extent, this also reflects American economic culture, which is generally suspicious of government intervention, particularly in comparison to the welfare states of Western Europe. Having read through many articles and reports of Porter’s shared value concept, the impression is that such initiatives are business-led, particularly by large companies such as IBM and Nestle.

There is a problem of scale here. While big companies have the resources available to explore CSV models, this is not the case with many industries and in particular SMEs - who lack the infrastructure needed to introduce paradigm shifts in their supply chains and business strategies. In addition to scale, there is also a problem of scope. Concepts such as shared value need not be restricted to the realm of business; they can also be considered in conjunction with debates about economic policymaking and public service reform.

This is where effective policymaking becomes crucial. Without appropriate policy structures in place, it is uncertain whether models such as CSV can move beyond their status as nice ideas that a handful of companies incorporate, to being central organising principles of our economy. Indeed, Porter and Kramer have been criticised for being dismissive of the potential for public policy to help guide and shape more sustainable, long-term business models.

It is for these reasons that I find the work the 2020 Public Services Hub at the RSA is doing highly interesting and timely. What 2020PSH is providing is a coherent policy framework for re-connecting business and society through a social productivity framework (its report is due to be launched early next year). This also has the potential to assist policymakers in articulating a clear role for business in the ‘Big Society’, and how Government, business, civil society and citizens can co-produce services and generate social value. In the background of unprecedented austerity measures and the opening up of public services, there is a clear need for new policy structures. Many stakeholders and business representatives at the roundable mentioned above spoke of the need for some form of direction from Government, and criticised the recent tendency of Government to disengage from this vital role.

Work being undertaken by the 2020PSH suggests that viable alternatives to inadequate CSR initiatives do exist - and most importantly that these can be integrated into policymaking.