A recent on line debate moderated by the Economist Intelligence Unit, the sister company of the authoritative magazine The Economist, posed the interesting question; " Does charity have anything to do with Corporate Social Responsibility, CSR?". First of all, let’s not get bogged down with narrowed definition and rigid separations. Everybody agrees that companies, by simply operating and being profitable in the market, do generate value, not only financial for its own stakeholders but to some extent, also for the society at large. Companies breed prosperity for local communities by “simply” creating jobs, ensuring livelihoods opportunities for their employees.
In a few words, companies play a role in the society by simply being themselves but nowadays this is not enough. On top of this, thre is also a problem with the way markets work: their dynamics are so wild and competition often so extreme that many companies have no other options than playing dirty, lowering their labor standards to become more competitive, dumping any safeguards they have towards the society they are embedded within. Therefore even before discussing CSR, it is paramount to ensure that any business is done ethically.
The implications of being an ethical business are so profound and transformative that without conceptually grasping it, the entire debate on CSR would be meaningless. Ethics in business ensure making profits and creating value for the shareholders through a “fair playing” competition in the market. This can be accomplished by going beyond the commonly established regulations if this is deemed necessary to maintain and enforces good working procedures, from production to supply and logistics. When there are no rules or the regulatory framework is weak or inexistent, an ethically managed company must ensure that its own standards are raised through self compliance mechanisms.
Along these lines, I wish UN Compact, a voluntary set of standards of good practices for private sectors, from labor conditions to anti corruption principles, could be reinforced not by voluntary self reporting but by independent audits resembling the ISO certification process. Be clear that certification model is not a panacea. The audits can be flawed and the concept has its own limitations especially because the label is a not a guarantee of a quality product.
Setting some sort of compliance mechanism to assess the ethics of a company would be a huge step towards ensuring that a business is sound in many aspects: because it has a low carbon footprint; because it reduces waste by investing in recycling technologies that are limiting pollution and other waste; because the HR system in place really cares about the staff and their families and most importantly because is profitable. Once a company is ethically sound and able to stay in the market by playing fairly, we can start talking about CSR.
Again I do not want to dwell on definitions but to me CSR is a blueprint for a company to achieve success in the market while creating “common good” thanks to internal and external practices and procedures that reflect the company’s commitment towards the stakeholders, starting from its employees, the community at large and its shareholders. On all this, charity can be a nice “adds on”, a sort of cherry on the top of the cake. For those companies who started from scratch and have little understanding about CSR but at least are no harm to anyone while pursing their interests, charity can be an attractive entry point to something much broader. If instead CSR remains limited to charity only, a much narrower version of this concept will emerge, eventually distorting its entire philosophy. A check can be a matter of great prestige and visibility for a company. For sure it does not grant that company any status of social responsibility champion.
To me charity can offer an opportunity. Being a first step, charity can lead to something more comprehensive and substantial that can really determine the social and ethical responsibility of a company. The real challenge is to move towards a more structured vision of corporate engagement that it is centered on the employees, the community, the society, and the environment. A true CSR oriented company sets its core mission in a way that advances not only the company’s own short term interest ( to be profitable) but ensures that the shareholders’ interests are aligned with the ones shared by other stakeholders and society at large. Local not for profit organizations would be happy to have more companies writing checks but this is not the point. We need to set in place the levers and incentives for companies to move from a “feeling good” actions to a deeper review of their practices in order to be ethically leaders in their respective markets.
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