Companies are enjoying record profits and corporate social
responsibility is enjoying unprecedented support. In the US,
non-financial reporting seems to be at a tipping point, with 49 of the
largest 100 companies now producing a CSR or sustainability report and
the Administration making positive noises. In the UK, no political
party now questions the importance of CSR and civil society seems
quiescent.
If something sounds too good to be true, it probably is. In the rush to
respectability, CSR is at risk of losing its way. One consequence of
its success to date is that investment managers are taking a much
greater interest in social and environmental issues than before. But
their overriding need to deliver good financial returns has led them to
focus on how social and environmental issues may affect company
valuations, and not on how the activities of companies affect society
and the environment. This is understandable: after all, they are paid
by their investment clients to make money, not to save the planet. In a
perfect world, materiality for a company would have everything to do
with the sustainability of its actions. But at present it does not, and
where investors lead, companies must follow. This value-free approach
is shaping corporate attitudes.
One example is the current interest in the fortune said to lie at the
‘bottom’ of the pyramid. Clearly it is a good thing if companies can
make money while lifting the world’s poor out of poverty. But what of
the billion or so for whom this market-led approach will apparently not
work (see page six). Are they not an appropriate focus for CSR activity?
Another is the continuing search for the business case. Predicating CSR
on its ability to show a return misses the point, which is that
companies do not exist solely to make money, but also have wider social
obligations. A third is the conflation of stakeholder dialogue with
CSR. Talking to interested parties is sensible, but a process is hardly
an outcome. As for non-financial reporting, in many cases this is
starting to feel uncomfortably like advertising. A report is no
substitute for action and some are poor substitutes for communication.
Companies need to get back to basics. Without values to underpin it,
CSR is as meaningless as a sustainability report produced because
everyone else is doing one. And without concrete examples of what has
been achieved, CSR adds to the risk burden instead of reducing it. CSR
is not a bonus to be paid out in good times and withdrawn when the
economic cycle turns. At present the balance feels wrong. Philanthropy
may have its limitations, but it can win hearts in a way management
processes never will, as the US understands better than Europe.
