CSR can cloak irresponsibility

Corporate social responsibility (CSR) has long been a hot topic globally. Prime Minister Manmohan Singh has lectured companies on it. Some corporations have won acclaim and awards for CSR.

Two of them were BP, the oil giant, and Goldman Sachs, the big investment bank. But BP has just created the greatest environmental disaster in history at its out-of-control Macondo deep-sea well, ruining bird and marine life as well as the livelihoods of fishermen and beach hotels. Goldman Sachs has just paid a whopping fine of $550 million for wrongful investment advice that trapped its clients.

They are, rightly, being castigated today. But this shows how shallow the CSR concept is, and how it can cloak cynicism and irresponsibility. Thomson-Reuters columnist Chrystia Freeland has called CSR “a fetish encouraged by the philanthropies that feed off it, and funded by the corporate executives who find that it serves their bottom line.”Consumers have been willing to pay more and buy more from companies with a CSR halo. Now they should know better.

CSR award-winners have typically engaged in green activism and philanthropy. British Petroleum changed its name to plain BP, and launched a hugely successful image-building campaign, labeling itself “Beyond Petroleum.”This showed BP as a green activist, with a new logo of a green and yellow sun. The company boasted it was among the biggest producers of solar panels and wind power, but these accounted for barely 3% of its total business. “Beyond Petroleum”won two “Campaign of the Year”awards from PR Week, and a gold “Effie”award from the American Marketing Association. BP funded green causes and won green plaudits, brushing aside accusations of “greenwashing”by Greenpeace.

Fortune magazine has an annual corporate accountability rating for CSR. BP topped the Fortune list in 2004, 2005 and 2007, and came second in 2006. In 2007, BP China won the “The Most Responsible Enterprise”award organized by China News Weekly and the Chinese Red Cross Foundation (CRCF). It also won the Corporate Citizenship Award for Chinese enterprises several times. BP won the 2007 Prime Minister’s CSR award in Malaysia for aiding a turtle sanctuary.

All this CSR was mere image-manship by a company with a horrendous record of cutting corners and neglecting safety. In 2005, a poorly maintained BP refinery exploded in Texas, killing 15 and injuring 180. In 2007, a BP pipeline, corroded through neglect, leaked 200,000 gallons of crude into the pristine Alaskan wilderness. The company paid a fine of $303 million to settle a charge that it had conspired to manipulate the price of propane gas. According to the Center for Public Integrity, Washington, BP refineries in Ohio and Texas in the last three years ran up 760 “egregious, willful” safety violations, while rivals Sunoco and ConocoPhillips each had eight, Citgo had two and Exxon had one comparable citation. So, BP accounted for 97% of all corporate refinery violations.

Every year, the World Economic Forum lists the “Global 100 Most Sustainable Corporations”.  BP has made the list many times. So has Goldman Sachs, for its work on climate change and carbon trading.

Goldman Sachs won a social innovation award given by The Financial Times and others for its famous “10,000 women”initiative. This provided 10,000 women entrepreneurs in 16 developing countries (including India) with management and business education, wrap-around services and access to capital. The scheme received high praise from independent observers. Seen by itself, it was a great success.

Yet it had nothing to do with Goldman Sachs’ core business. After the financial crisis of 2007-09, many questions are being asked about financial institutions that made billions even as their investors suffered.

Goldman Sachs was the superstar of Wall Street. Its top executives rose to powerful political positions. Examples include Robert Rubin, Bill Clinton’s treasury secretary; Hank Paulson, Bush’s treasury secretary; Neel Kashkari, Paulson’s bailout chief; Reuben Jeffrey, interim treasury investment officer; Stephen Friedman, head of the New York Fed; and Jon Corzine, former governor of New Jersey.

Many observers complain that Goldman virtually captured successive governments, and thwarted prudential measures that might have prevented the financial crisis. Seen in this light, the 10,000 women campaign was PR, not CSR.

Clearly the whole concept of CSR needs to be recast. It must be delinked from philanthropy: after all, even the Taliban and Lashkar e-Taiba have well-functioning philanthropic activities. CSR should really mean observing high standards in the core business of corporations, in dealing with shareholders and clients and the communities they operate in. By all means let corporations also make green and philanthropic efforts. But don’t confuse these with social responsibility. That will only encourage BP-style cynicism.

2 thoughts on “CSR can cloak irresponsibility

  • 2010.Sep.09 at 14:31
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    cannot ignore that charity was done by people who didnt need to do it , even if it was only to impress investors/ customers. that money could have financed an advt. campaign and this csr publicity campaign should only be considerd good or bad if it yeilded image benefits more than the classical advt. campaigns .
    running an business is a different game where inordinate displays of kindness / gandhian affections during deceision making – well it is an amusing idea.
    the over riding social responsibility of a corporate is to make profits , grow , create wealth , jobs , opportunities , invest and build trust in investors etc. by this a company distributes prosperity to those who align with it as well as those who align with those who align …. and the economy is built up .
    LeT , taliban , us govt , congress waiving loans , all do it for a superior ( selfish) purpose.
    those hooked to charities or living off philanthropies need to follow the same basic economic principles that apply to everybody else in society i.e impress the guys with the money . they can follow two routes- 1- there is the conventional beggar way – say thank you for what you have given and we want more ,
    the second way is to make the giver feel guilty for not giving enough by using all sorts of beseeching devices.
    these too are just marketing devices for getting more charity.

    parasites could do well to check up on their own hideous efficiency levels , the more the helpers , the more poverty becomes endemic as people get addicted to charity.

    ethics in business is a relative term , some people are guilty of being smarter like goldmann sachs you’ve mentioned , some may surmise that accidents happen inspite of the best safety precautions and every driver without a seat belt will tell you that if you read every thing in the safety / rule book too well you might never get anything done.
    i have no problem with preachers , just didnt expect you to come up with this ethic peddling peice.

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  • 2010.Aug.03 at 17:02
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    You are absolutely right. Nowadays this CSR thing is only for image building instead of real social responsibility. “After all, even the Taliban and Lashkar e-Taiba have well-functioning philanthropic activities” rightly said.

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