Is CSR dead ?

tree falling leafThe OECD MNE Guidelines are the world’s most comprehensive multilateral agreement on business ethics and the only international corporate responsibility instrument with a built-in grievance mechanism. Under the Guidelines – this year 40 years old – the term ‘’CSR’’ is not used, rather they discuss ‘’responsible business conduct “(RBC) OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines). Responsible business conduct means that businesses should make a positive contribution to economic, environmental and social progress with a view to achieving sustainable development and that businesses have a responsibility to avoid and address the adverse impacts of their operations. While the concept of CSR is often associated with philanthropic corporate conduct external to business operations, RBC goes beyond this to emphasize integration of responsible practices within internal operations and throughout business relationships and supply chains.

Nowadays CSR is a global industry. Most companies employ CSR managers, vice presidents, and experts; armies of CSR consultants are on offer and hundreds of CSR awards are distributed every year. In addition, countries are increasingly implementing CSR laws, action plans and even CSR ‘taxes’. Given the widespread recognition of CSR, is it maybe necessary to bury it six feet under?

Did CSR committed suicide? Several characteristics contributed to its demise.

First, CSR is often associated with philanthropy and volunteer work in the social sphere, rather than long-term sustainable development. This is especially true in some regions where CSR activities are limited to companies building schools, or sponsoring local activities. Company CSR reports are often largely descriptions of feel-good projects and activities that ‘give back’ to society. There is a huge misunderstanding between the meaning of CSR and corporate citizenship.

Second, CSR is often understood to be an optional add-on external to core business operations. For example the scope of a CSR managers’ responsibility is limited to voluntary initiatives while responsibility for non-voluntary obligations falls to procurement officers, human resources or legal counsel. Therefore corruption issues are often not considered a CSR issue and are not dealt with by CSR managers. Corporate tax responsibility, an integral part of the OECD MNE Guidelines, likewise is most often not on the radar screen of a CSR manager.

This division is problematic. The ‘voluntary’ association of CSR severely limits the role of CSR managers within their companies if they only deal with issues that are viewed as peripheral. In contrast, RBC, as promoted by the OECD, provides a more integral perspective; it is a core business function, and as such must be integrated within corporate governance, procurement, finance, and so on.

Additionally, core elements of RBC as outlined in the UN Global Compact or the OECD MNE Guidelines are not voluntary in most jurisdictions. Bribery is a crime in all OECD states, non-financial disclosure will be mandatory in the EU for large companies, and many issues of competition and consumer interests also covered by the OECD Guidelines are legally binding in most countries.

Finally, the ‘voluntary’ association with CSR suggests there are no consequences to non-compliance. That is a misconception. Research demonstrates that there is a strong business case for companies to behave responsibly. Responsible business practices can result in positive outcomes such as improved reputation and productivity. On the other hand, irresponsible practices can lead to significant financial liabilities and hamper access to finance. Investors who take environmental and social issues into account in their investment decisions today represent a portfolio of at least $59 trillion in assets under management.

CSR is strongly associated with the ‘old school’ social audit system. The voluntary, peripheral connotations of CSR have been reflected in the sense that often there is little follow-up done to correct shortcomings identified in social audits unless they have a bearing on other, generally economic, aspects of business operations. Responsible business conduct goes beyond auditing and stresses the importance of a continuous process of due diligence, which in addition to identifying risks requires prevention and mitigation as well as addressing negative impacts where they do occur.

Another problem is that CSR has often been used primarily as a PR tool, contributing to the perception that it is merely a greenwashing exercise. In the words of Michael Townsend: “Corporate Social Responsibility is, at best, only a partial solution — one which can be misused to create an illusion of responsibility.” Volkswagen, prior to its emissions rigging scandal, used to claim the number one spot on the Dow Jones Sustainability index. Enron has received CSR awards, and scores of companies display CSR-logos on their website while ignoring major corporate responsibilities. Fortunately, as increasing scandals have exposed the hollowness of some CSR programmes, more and more companies have begun to move their CSR functions out of their PR or communications departments.

In practice there is no contradiction between corporate sustainability and responsible business. Indeed company sustainability is essentially derived from responsible business conduct. Thus, while CSR as a term may be dead, the concepts of corporate responsibility and corporate sustainability are still very much alive and may well live forever!

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