The Myth of CSR

Submitted by Rob Katz on September 27, 2005 - 11:15.
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A controversial title, to be sure. The Myth of CSR (PDF), published in this month's issue of Stanford Social Innovation Review, identifies a key truth about corporate social responsibility while failing to take the next step. Deborah Doane hits quickly on CSR's underlying fallacy: "ultimately, trade-offs must be made between the financial health of the company and ethical outcomes. And when they are made, profit undoubtedly wins over principles." Bravo, Deborah!

After that, the article takes a turn for the worse, although I don't necessarily disagree with it. Doane identifies 4 "Key CSR myths":

  • Myth 1: The market can deliver both short-term financial returns and long-term social benefits.
  • Myth 2: The ethical consumer will drive change.
  • Myth 3: There will be a competitive "race to the top" over ethics among businesses.
  • Myth 4: In the global economy, countries will compete to have the best ethical practices.
Are these really "myths" - or have we not seen enough proof to make them reality? There's a big difference. But its Doane's conclusion that gets me - she suggests corporate law reform that would require US and European corporations to recognize communities, employees, and the environment as stakeholders. Nothing new there.

Doane and her CSR colleagues should wake up to the BOP. Take Myth 1, for instance. Case after case shows that the market CAN deliver financial returns AND social benefits - just look at some case studies or browse the Activity Database for hundreds of examples. A soon-to-be released What Works case study will document how SHEF is delivering essential medicines to unserved rural areas in Kenya - and doing so profitably.

Is CSR a myth? Your call. Will opportunities to serve low-income communities profitably drive corporate profits in the next 50 years? I'm willing to bet on it, and no amount of feel-good CSR legislation is going to change that.

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Disagree on some points
Submitted by John Paul on September 27, 2005 - 12:56.
Rob, while I agree with you that market opportunities at the BOP will be a significant driver of social innovations, I don't entirely agree with your dismissal of many of Doane's conclusions.

Regarding Myth 1, while it is true that markets can deliver both financial and social benefits to the world's poor, the time horizons for achieving these outcomes is typically longer than most corporations are used to or willing to accept. If I'm not mistaken, the BOP Learning Lab highlighted patience with this market as being key to success, and I think this was the point Doane was making. Any business that provides products or services to markets at the base of the pyramid needs to be realistic about what to expect; the BOP provides opportunities for longterm growth and competitive advantages, not a short term profit center.

I also disagree that legislation is a waste of time, and believe that it could actually help to accelerate or enhance offerings to the poor, provided whatever law is passed actually has some teeth. As much as current research and case studies suggest that success at the BOP is enhanced by taking into account social and environmental impacts, we can't assume that this will be the norm. In terms of ethical business practices, there are far more companies participating in the race to the bottom than in the race to the top. Legislation provides just one more financial reason for a company to be a good corporate citizen - not the only reason - but definitely a potentially significant one.
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