Narrow 'Economist' definition of CSR leaves out potential to improve consumer relationsThe Economist is my favorite magazine, covering business and politics with depth, insight, and - for the most part - a refreshing lack of dogma.
Which is why its recent analysis of the corporate social responsibility movement was so disappointing, adopting a sneering tone and seeming at times to wilfully misunderstand what CSR is all about.
I'll grant the editors of The Economist their contention that proponents of CSR have a variety of motivations and an apparently endless laundry list of demands. I'll even grant that some of them are anti-capitalist extremists. And I'll certainly grant that some of the CEOs who have publicly embraced the demands of the nongovernmental organizations (NGOs) pushing for greater responsibility are motivated by cynicism rather than idealism.
None of that seems to me to be a reason to deride a movement that has so much potential to improve the relationship between business and society.
The first bone of contention I have with The Economist's analysis concerns its insistence that merely by making profits for its shareholders, "the company, without even trying, is doing good works." Yes, profitable companies provide jobs for employees and products and services that customers want. "The selfish pursuit of profit serves a social purpose." It sounds as if the editors have swallowed the gospel according to Milton Friedman in its entirety and without question.
All of that is true. But the same case could be made for cocaine cartels. They provide employment, a product that is in great demand, and fabulous returns for owners. But they also create what economists call externalities - costs borne not by the business itself, but by society. Externalities inflicted by cocaine cartels are extreme, but all businesses inflict some costs on society: environmental damage in the case of automobiles, increased obesity in the case of fast foods, and so on. Proponents of CSR demand that businesses acknowledge those externalities and make every effort to minimize them.
My second bone of contention is a purely pragmatic one, which is that a company with a broader definition of responsibility can gain a competitive advantage over a company that believes no charitable act should come between its shareholders and its precious quarterly return.
New research from Edelman shows that the world's most trusted brands belong not to multi-million dollar corporations, which, despite their massive advertising budgets, are regarded with skepticism, but by NGOs like Amnesty International, Greenpeace, and Oxfam, which are perceived as having the interests of society at heart.
Trust is critical to long-term success, and no company should willingly surrender it, even if it means adopting a broader definition of responsibility than The Economist might like.