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WHAT'S WRONG WITH CORPORATE SOCIAL RESPONSIBILITY? : The business case for CSR

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Companies engage in CSR because, for a number of reasons, they think it will be good for their profit margins. The business case for CSR emphasises the benefits to reputation, staff and consumer loyalty plus maintaining public goodwill.

  • Reputation management– Increasingly, corporations are trading not on products or services but on their reputations, brand value, 'goodwill', and 'intellectual capital'. These are termed 'intangibles' and have an actual numerical value on the company balance sheet. For example, 96% of Coca Cola's total value is intangibles9, and an estimated 53% of the total value of the Fortune 500 companies, worth $24.27 trillion, is made up of intangibles10. With 85% of consumers reporting that they have a more positive image of a company that is seen to make the world a better place11, CSR is an essential strategy for ensuring the company’s reputation.
  • Risk management– Investing in a company is a gamble and investors want to see that a company is a safe bet. CSR means that companies have to be aware of the issues which might cause them to be targeted by campaigners. This doesn't necessarily mean cleaning up their act. It can equally mean trying to occupy the ideological space around an issue or getting decision makers to agree with their point of view with a few strategic donations. One Ethical Corporation article, entitled 'Stealing the NGO's Thunder'12 advised companies, as part of their CSR work, to 'develop at an early stage intellectual leadership in public on issues that in the future may present NGOs with opportunities for critical campaigns', by, for example, developing corporate positions and speeches for CEOs, presenting the issue in interesting and innovative ways to generate positive headlines and commissioning research from 'credible institutions', and funding corporate front groups - supposedly independent research groups funded and controlled by the company13.

    BP's strategy of appropriating the language of environmentalists and positioning itself as a socially responsible company on the issue of climate change by buying up a solar company (for a fraction of the amount it spends on oil acquisitions) is a clear example of a company attempting to take intellectual leadership of an issue where it finds itself criticised, and has been well documented elsewhere.14
  • Employee satisfaction– With 3 out of 5 people reporting that they want to work for a company whose values are consistent with their own15, being seen by employees as a responsible company as well as a fair employer helps to attract and retain the best staff. This only applies, however, when a company cares about the quality of its staff. Companies will go to great lengths to appear socially responsible to white collar or skilled workers in their offices in Northern countries. Unskilled workers in developing countries, and casual workers in the North, are rarely afforded the same labour rights, not to mention the volunteering schemes or welfare packages that the same company offers its more privileged workers.
  • Investor relations and access to capital– Many investors consider more 'socially responsible' companies to be more secure investments. 86% of institutional investors believe that CSR will have a positive effect on business16. Also, a growing number of institutional investors have some kind of socially responsible investment portfolio and therefore favour companies that are seen as socially responsible. (See section on socially responsible investment).
  • Competitiveness and market positioning– CSR is still breaking into the mainstream. Investing in CSR now means that a company can position itself as the market leader in its field, and will be ahead of the game if regulations are brought in or when other companies in the sector take up CSR as a business strategy. Buying out ethical alternative businesses, for example Cadbury's recent purchase of Green & Blacks, supermarket sales of organics or Nestlé's move into fairtrade coffee, is one way that companies are able to cement their market position, and also control profits from niche markets.
  • Operational efficiency– CSR can save money. Some environmental measures such as minimising waste or saving energy can also reduce operational costs. These are often the type of measures prioritised by companies. But what happens if measures necessary to protect the environment are not profitable?
  • Maintaining the license to operate – Mistrust of corporations is widespread, if for no other reason than that few people even in the rich world actually gain from the level of power corporations have been granted in society. More and more people report increased stress, harder work and greater insecurity as they chase elusive gains. Companies see that the tacit license to operate society grants them is under threat. Their response is to attempt to convince society that they have a positive impact.
  • CSR consultancy SustainAbility has described CSR as 'helping

    to prevent the unfolding backlash against globalisation and

    reverse the recent erosion of trust'17.