Corporate Gains: Corporate Social Responsibility Can Be the Strategic Engine for Long-Term Corporate Profits and Responsible Social Development

By Berkhout, Tom | Alternatives Journal, January-February 2005 | Go to article overview

Corporate Gains: Corporate Social Responsibility Can Be the Strategic Engine for Long-Term Corporate Profits and Responsible Social Development


Berkhout, Tom, Alternatives Journal


ASK ENVIRONMENTALISTS or social activists what they think of corporate social responsibility (CSR) and they will likely respond with a reflexive rolling of their eyes. Pose the same question to a hard-nosed business person and do not be surprised if you elicit a similar response.

At its worst. CSR is little more than corporate greenwashing--the voluntary adoption of a token social or environmental initiative intended to enhance a company's corporate image. At its best, CSR may provide the starting point that businesses need to begin moving toward sustainability.

So what exactly is CSR? If you're looking for a singular definition, you will not find one. Corporate social responsibility, like the phrase "sustainable development," means different things to different people. Canadian Business for Social Responsibility (CBSR) is a business-led initiative to promote CSR in Canada whose membership includes corporate bigwigs such as Nike, Alcan, Scotiabank and DuPont. CBSR defines CSR as, "a company's commitment to operating in an economically, socially and environmentally sustainable manner, while recognizing the interests of its stakeholders, including investors, customers, employees, business partners, local communities, the environment and society at large." (1)

At first glance, the CBSR definition appears to be a long way from the traditional free-market view of the broader social responsibilities of business. The market perspective is probably best summed up by American economist Milton Friedman's statement, "there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game." (2)

In this free-market interpretation, the responsibility of business is to reflect the values and desires of a society as efficiently as possible in the goods and services it produces. A company that does this well will be rewarded in the marketplace by customer support. The support of a company's products is in turn understood to include support for the methods by which they were produced. Democratically elected governments set the rules that determine how products are produced and sold. It is then up to businesses to compete with one another within the parameters of these rules. Firms that give too much flexibility to their managers and executives to interpret and respond to broader social issues run the risk of jeopardizing their legal responsibility to earn the maximum profit possible for the company's shareholders.

Critics of the free-market approach to corporate responsibility argue that companies who focus exclusively on meeting their legal and economic obligations will ultimately fail to secure the level of social legitimacy needed to operate. (3) And why wouldn't simply following the law be enough to earn a good reputation in the public's eyes? Laws are at best a delayed reflection of society's perpetually evolving norms and values. A corporation that fails to perceive and act on informal societal expectations will be viewed as out of sync with the society on which its existence depends. The rules of the game, therefore, are never as straight forward as following the letter of the law. (4)

The public response to Shell Oil's 1995 attempt to sink its floating North Sea oil storage tank, the Brent Spar, shows what can happen when a company follows the law but fails to gauge broader societal expectations. Built in the mid-1970s, the Brent Spar was used by Shell UK as an at-sea storage facility for the company's North Sea oil excavation operations. In 1991, Shell found it no longer required the Spar and had to decide how best to dispose of it. It finally decided to sink the Brent Spar in over 2000 metres of water at the North Atlantic's North Feni Ridge. Legal permission to sink the Brent Spar at sea was granted by the British government in February 1995, in accordance with international law.

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