The business of business is business, or so the old cliché goes. However, the growing popularity of ‘corporate social responsibility’ (CSR) suggests that the hard-nosed approach is slowly being supplanted by a kinder, more caring business model. But just what is CSR and why is there such widespread interest in it? In an article published in 2007, Simon Enoch seeks some answers, and considers whether CSR actually adds up to anything meaningful.
Enoch begins by looking at the economic and political context of the past 30 years or so. In that time, across large parts of the world, a succession of governments have carried through neoliberal programmes of massive deregulation and privatisation, and the state has withdrawn from many areas in which it had previously borne much responsibility. Similarly, the global free trade programme has severely curtailed the power of the state to intervene in trade or trade-related matters such as labour or environmental standards.
In this climate of unregulation, opportunistic, exploitative and corrupt behaviour by executives in companies such as Enron has fuelled public cynicism about business practices. For example, a Roy Morgan opinion poll conducted in Australia in 2007 looked at public estimations of professional honesty and ethics. Business executives achieved high or very high ratings in the eyes of just 18% of the population, with directors of public companies rating similarly, at 21%. (By way of contrast, school teachers scored 78% and nurses, 91%.)
Whatever other benefits they have derived from the implementation of the neoliberal agenda, corporations have found that they can no longer rely on the state to justify or validate corporate behaviour. Given that the state has largely retired from the field of regulation, Enoch notes that the public has increasingly required corporations themselves to address their societal and ecological impacts. The international public outcry over Shell’s dumping of the Brent Spar oil rig is a typical example.
As a result, individual industry sectors have filled the ‘policy gap’ with a host of voluntary standards, codes of conduct, initiatives and programmes. International examples include the ISO 14000, and the Forestry Stewardship Council; examples to be found in Aotearoa New Zealand include The New Zealand Bankers’ Association Code of Banking Practice, the Researched Medicines Industry Code of Practice, and The Direct Selling Association Voluntary Code of Practice.
It is in this context that the concept of CSR has arisen. One of the foremost advocates of CSR, the World Business Council for Sustainable Development (WBCSD), describes CSR as “the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.” The WBCSD also recognises the legitimacy aspects of the issue: CSR is “a guiding vision that can help companies maintain their license to operate in an increasingly globalized world … business is not divorced from the rest of society … CSR helps companies live up to their responsibilities as global citizens and local neighbors in a fast-changing world.”
More specifically, as Enoch puts it, “CSR attempts to induce corporations to recognize that their operations impose costs on society that are not normally factored into business calculations” (p.81). If they are to implement CSR, firms must attempt to reduce or eliminate these ‘negative externalities’. Positive relationships with ‘stakeholders’ are also essential to the process. If the process is carried through successfully, firms will reap many benefits from happier stakeholder communities.
However fine these aims may appear, upon looking at the internal logic of CSR, Enoch finds it seriously flawed. He identifies these failings by asking two very simple questions: Can corporations really internalise their negative externalities? And what follows from it if they can?
A simple lack of credibility is the first major problem for Enoch. Is internalisation of all true costs really imaginable, if one thinks of the combined social and environmental impact of the oil industry or car manufacture? Some amelioration of impacts is certainly believable – but can one really envisage such corporations picking up, say, the full cost of the global environmental impact of vehicle CO2 emissions? Or the full cost of the impact on respiratory health of the carbon monoxide, nitrogen oxides, ozone, sulphur dioxide and fine particulate matter in vehicle emissions?
Nevertheless, if this full internalisation of costs does occur, it follows that environmental ‘goods’ such as clean air and pure water will no be longer available for ‘free’. Such goods will come to have an economic cost, and the costs of production must be driven upwards, massively in some sectors. Thus, in order to maintain profitability – which, we must remember, is essential to the survival of any business, irrespective of any sense of public approval – such costs must be passed on to consumers.
Furthermore, if all costs could be internalised, and if profitability could be maintained (by an ever-shrinking pool of affluent consumers, one assumes), that would not be the end of the matter. Capitalism requires economic growth to survive and, regardless of the constraints of CSR, growth must continue. The WBCSD agrees; in fact, it believes that growth is an essential prerequisite of sustainable development, which “rests on three fundamental pillars: economic growth, ecological balance, and social progress.”
Enoch argues otherwise: “the imperative of growth is the main culprit in the destruction of the environment … expansionism and sustainability are contradictory objectives that cannot be realized” (p.85). A simple calculation illustrates the scale of the problem. For example, 3% growth in GDP per annum (which is considered ‘modest’) adds up to a doubling in the size of the economy in 24 years. Imagine the output of the economy in 2032 being double what it is today. Imagine the social and ecological consequences of production at twice today’s level. Can CSR hold to its commitment to sustainability by internalising all negative externalities in the face of this inexorable drive for growth?
There is one further consequence of CSR that Simon Enoch illuminates in his article. CSR, he says, promotes the idea that our well-being depends on the “enlightened self-interest” of corporations, and reinforces the mind-set that sees social change as arising primarily from the “transformation of attitudes of individuals in positions of power.” It precludes collective action by citizens by suggesting that “we merely need to put our faith in the beneficence of corporate capital to solve the [ecological] problem for us” (pp.88-89).
In developing this point, Enoch draws on the work of Ewa Charkiewicz and suggests that CSR embodies “a neoliberal rationality” that addresses “the social and environmental effects of capitalist production through the individualized mechanism of the market.” Indigenous peoples, community groups, trade unions, development agencies, and NGOs are reframed and reorganised as ” ‘stakeholders’ positioned in the corporate orbit” in order to restructure a potentially critical discourse away from discontent and resistance (p.89).
In conclusion, Enoch find CSR to be primarily aimed at restoring and maintaining corporate legitimacy. The goals set by CSR are unlikely to be achieved, but what is important from the corporate point of view is that the goals are impressive and laudable. For Simon Enoch, CSR is “progressive window dressing … an essentially conservative phenomenon seeking to maintain the status quo while placating public fears about the state of the ecological crisis” (p.85). It is a ‘Potemkin village’ – in other words, a façade.
Simon Enoch (2007) A greener Potemkin village? Corporate social responsibility and the limits to growth. Capitalism Nature Socialism, 18(2) 79-90.