In Criticism Of Corporate Social Responsibility

Published by MBA Skool Team, Published on October 16, 2012

In today’s global socio-economic scenario, where the ideology of capitalism has been tainted by the recent dips in economic fortunes, and the discourse of capitalism left permanently marred, the practice of corporate social responsibility has become an increasingly catalytic strategy for enterprises to boost their brand. Given the subjectivity inherent to defining social responsibility, the practice of CSR itself suffers from the presence of varying definitions and the inability to circumscribe the limits, scope and reach of CSR activities.

There is however one delineation that allows us to typify CSR and categorize activities falling under the CSR umbrella. CSR activities can acquire primarily two hues, a) the endeavor that is directly related to the core initiative of the organization, and involves internalizing external costs that the organization’s activities impose upon society, and b) engaging in activities that are inherently dissociated from the core initiative of the organization.

For the organization producing running shoes, ensuring that its employees and factory workers are provided a fair wage and hospitable living and working conditions, or that the wastes generated by its manufacturing processes are properly disposed of and are not allowed to affect people would fall under the purview of the first type, while the running shoe company providing mosquito nets to malaria ridden villages falls under the second type.

Inherent and endemic to the notion of CSR, irrespective of the type, however is the belief that CSR needs to be a marketable practice in order to realize greater long term profits and justify the short term costs incurred by the organization. While CSR may have had more humble beginnings, with the first few organizations using their financial capital and influence to effect positive change in society, today, the very same act is eventually maligned by the presence of ulterior motives and the tendency to associate financial viability with every action of the organization, view every move through the blinkered lens of pecuniary concerns. The question that then needs to be begged is, can this extra-curricular engagement with society be termed “social” when there always is an underlying financial incentive weighing the organization’s hand?

Before we proceed with a critical evaluation of the practice of corporate social responsibility, let us seek to determine the philosophical foundation of CSR, and highlight some of the fundamental assumptions inherent to the model. The steadfast notion that CSR activities must be communicated to the public belies the assumption that the primary motivating and driving force of the corporation is profit seeking and then profit maximizing. The corporation, partnership, and every other form of economic organization of the human effort, all are organized around the centrality of economic profit as a means of incentivizing efficient allocation of resources and production of goods and services.

In such a situation, where capitalism is the orthodox means of organization, corporate social responsibility is viewed as an addendum to the corporate mission, one that can provide significant positive spillover effects for the corporation from being associated with an activity with significant positive connotations that can prove useful in brand image manipulation and cater to the evolving needs of more socially conscious demographics.

In undertaking an analysis of CSR, it is necessary that we distinguish between the two types of CSR activity outlined earlier. CSR activities directly related to the attempt to utilize more sustainable, fair and ethical manufacturing processes are a fair response of a corporation to changing social mores and a reflection of the expectations of the human collective. Viewed in such a light, the implementation of these very specific CSR practices by corporations, and the expectations placed by society upon corporations are indicative of the maturation of the society, and the broad dispersion and acceptance of the principles of justice and equality and sustainability amongst the people, a move to refuse to be restricted by the parable of laissez-faire and view their own position in society as that of an economic agent driven purely by numeracies. For the rest of this piece then, except where explicitly mentioned otherwise, the term CSR is used to imply a broadening interaction of the corporation beyond the scope circumscribed by its strictly economic activity.

To the extent that the discussion on CSR can be restricted exclusively to such activities, CSR is guilty of inducing a short term, myopic perspective on engagement with communities and preferencing spread over depth of involvement. The need to engage in activities that lend themselves to marketing results in corporations undertaking activities that lend themselves to easy quantification and have short gestation periods; and funding them with the view to quickly improving the metrics identified for gauging success.

Further, the desire to be viewed by the public as a corporation that is consistently broadening its engagement with society can lead corporations to undertake short term engagements with minimal capital requirements and immediately visible benefits that can be peddled to the public, as opposed to programs that have long gestation periods, or those that do not lend themselves to simplification and easy quantification for the purposes of marketing.

Finally, even when projects of a short term nature are undertaken, due to the involvement of corporations exclusively with communities with reduced opportunity sets, limited means of expression of their preferences in the economy, and diminished access to opportunities, and the increased sensitivity of these communities to external economic shocks, a short term involvement with such communities tends to destroy local economies, prevents people from searching for their own solutions , reduce opportunities for entrepreneurship that can form pathways out of poverty and can damage or reduce the relevance of existing social institutions, imposing devastating long term consequences upon  the lives of people.

An additional charge then that can be laid against CSR practices arises from the corruption of the motivation for engaging in CSR and the move beyond the scope of purely economic activities. As opposed to using policy assessment and analysis of welfare costs and benefits to select projects with the greatest scope for impact intervention, corporations determine project financing purely on the basis of cost. Therefore while the stated objective is to discharge a perceived social responsibility, neither the motivation nor the criteria employed for selection of projects are indicative of this and represent inefficiencies in the attainment of social objectives.

Furthermore, the overwhelming financial influence of such corporations implies that today, more than the specialized NGO’s and government agencies, the CSR practices of corporations are the most influential and powerful brokers of change in society. Society has been driven to accept implicitly the mandate of the corporation to engage in such CSR as a reflection of the priorities of society. The NGO, when it requires donations and grants, assumes and requires active participation from society, and the allocation of funds amongst NGO’s is an accurate reflection of the conscience and prioritization by a society.

In a sense, the NGO represents a democratic system of participation and resolution of society’s many ills, while the corporation is an autocratic system that has inevitably been corrupted by the financial motive, short term vision for engagement, lack of accountability against the context of its CSR activities and the selection of projects on the basis of fallacious criteria. The overwhelming publicity of CSR has further eclipsed the notion of diffused social responsibility by allowing the responsibility for action and involvement to be concentrated within, and become the sole and exclusive domain of the corporate world, and then too, remain an act undertaken often as a red herring, by an organization in need of some positive publicity.

Irrespective of the type of CSR, the increasing expectation from the public for corporations to have significant CSR practices is also indicative of the increasingly distanced position society is adopting vis-à-vis discussing and engaging in political activism and addressing issues of fairness, equality and justice. More and more individuals are possessed of the view that their work for an organization with a CSR practice absolves them of any obligation to engage and express, and negates any moral imperative that might exist since transitively, their association with the corporation that engages in CSR implies that their presence has positive ramifications upon society, while in reality it is merely indicative of the position of convenience and moral expedience that we have adopted as a collective.

When viewed against the context of the individual, social responsibility encompasses a set of ideas that essentially define a relationship between an individual and his surroundings – people, environment, economy, country. It purports that every individual has a responsibility towards society, in that he ought to be heedful of the repercussions of his actions and decisions outside his sphere of interest as well.  The individual is subject to both positive and negative moral obligations, he is expected to not just not harm another individual or act to restrict or impinge his freedoms (the negative right), but is also subject to the need to act to diminish the suffering, injustice and remedy the plight of others.

Social responsibility should be just that, a protracted effort by a society to remain apprised of the cost and consequences of its actions, and to form an introspective, self reflective collective, rather than outsourcing the responsibility to the corporation. The individual, as a legal and moral entity, one that contributes to the formation of an ethos and the determination of morality is possessed of an obligation that does not end with clicking like on the Facebook page of Amnesty International, or sharing a tear jerking story. Becoming ‘socially responsible’ is not just the inculcation of certain values. It is not an end, but an endless process.

This article has been authored by Subinay Bedi from IIM Indore and Nandakumar Ganesh from BITS Pilani, Dubai.

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