We should encourage public companies simply to conduct their own affairs responsibly, rather than pushing them into world-changing altruism, writes David Walker.
A recent article in The CEO Magazine made the case for the value of “corporate social responsibility” or CSR. “There are many companies that truly want to give back to the community,” it says, “whose philanthropy is borne out of a genuine desire to do good.” And some, it argues, “have not only set out to change the world on a very large scale, but are already having a huge impact.”
Examples included furniture company IKEA’s flat-pack refugee shelters, clothing business Patagonia’s efforts to produce longer-lasting and repairable jackets, and Coca-Cola’s efforts to reduce its water use.
The good businesses can do
Businesses already do a great deal to create successful societies. Business itself is a remarkable social cooperation system, organising joint activity by strangers who lack the ties of family or tribe. That alone makes it inherently pro-social.
Yet business activities that reinforce social ties and behavioural norms do make a difference – from backing staff volunteer work, to encouraging staff to report environmental issues. People mostly want to do the right thing, and there’s plenty of evidence that these sorts of activities bolster “employee engagement”. Beyond that, most people in business want to feel that they are on a mission that will do some good. These are desires worthy of catering to.
Beyond that, there’s research evidence to suggest that CSR programs aligned with the company’s purpose and values can have some effect. This is why the OECD talks about “responsible business conduct” as a better alternative to CSR.
So if IKEA really can use its flat-pack expertise to help meet refugees’ housing needs, or Patagonia makes its jackets last longer, that’s good for them and the world.
At the same time, though, we should be careful not to place more weight on corporate altruism than it can bear. Many corporate social and environmental initiatives can help make the world a better place. However, they are unlikely to be world-changing.
The limits of altruism
There are many reasons to constrain large-scale corporate altruism. But the simplest ones are these:
- Solving complex social and environmental problems is not what most companies do best. Public companies, in particular, are designed from stem to stern to produce profits. They are not set up with the checks and balances necessary to give shareholders or the public a truly honest account of their philanthropic results.
- The logic of private business remorselessly pushes companies to chase the projects that make them look as good as possible. In theory, private firms should be able to bring special expertise to social and environmental problems; in practice, we mostly seem to get public relations. I once sat through a 20-minute “corporate social responsibility” presentation from cigarette manufacturer Philip Morris.
Private altruism is important, and becoming more so. But most of the evidence suggests altruism will continue to be best carried out by private non-profit groups, or by dedicated government bodies. If we demand high profile, large-scale corporate social responsibility, we are just as likely to get corporate waste, dressed up as good deeds.