The misconceptions behind Corporate Social Responsibility

Richard Karmel is the Global Head of Human Rights at Mazars and in his blog today he considers the misconceptions behind Corporate Social Responsibility (CSR).

What is CSR?

Our work at Mazars involves advising and helping companies understand what human rights means to them and how they should correctly report on them, for the benefit of all of their stakeholders.

CSR is an all-encompassing wrapper that has been applied to those areas that impact on wider society; for example: human rights issues, environmental issues, anti-bribery and corruption.

Mazars and Shift are shortly due to publish the United Nations Guiding Principles Reporting Framework that will help companies accurately disclose how they are respecting human rights throughout all their activities.

The problem with CSR is that most companies don’t believe that there is a set of principles that outline what a company should do to meet their social responsibility. However, we have the UNGPs on Business and Human Rights but because the UNGPs don’t refer specifically to CSR, most companies don’t make the connection. Instead, businesses are able to define what they believe is good CSR, which is often what is most convenient to them and not the people impacted.

CSR isn’t only about companies doing no harm. Moreover, it should be embedded within corporate strategies such that it not only ‘does good’ in the community, but that it also benefits the business.

The problems with CSR

An article written by Joanne Bauer on outlined, in depth, the problems with CSR.

According to Bauer, CSR has roots in the writings of American steel magnate Andrew Carnegie. Carnegie believed that it was up to the more fortunate members of society to aid the less fortunate.

As an ideal, it was a good one; but in today’s society there is no overarching guidance as to what counts as corporate responsibility. Of course, it’s good that such a movement has made companies stand up and pay attention to the positive role that they can have in society, but there are flaws and Bauer highlighted two.

  1. Lack of standards
  2. Civil regulation

The critics argue that business managers are picking and choosing what areas of social benefit that their companies will address, in order to help build and maintain their image.

CSR is being used to mask socially flaws

It’s common for companies to use CSR projects to mask their socially bad practices. In my most recent blog, I talked about Nike’s human rights difficulties in the 90s and the affect that it had upon companies.

Because of Nike’s issues with its supply chain, many companies attempted to promote their human rights credentials by publicly reporting on the amount of money they contributed to local communities and their infrastructures.

Whilst in many ways acts like this should be admired, it does not exonerate the company from ensuring proper labour practices within its supply chain. For example, it doesn’t help if the company builds local schools using profits they generated from the use of child labour. A company’s respect for human rights is not demonstrated by how it spends its profits, but by how it earns them.

The public regulates business behaviour

More often than not, companies will use their CSR projects to help those that shout the loudest. Bauer suggests that vocal minorities dominate the decision-making process of companies, whilst others find that they don’t have the time or means to participate.

Companies are too often forced to use their corporate power to respond to a particular form of environmentalism reflecting middle class interests.

A lack of legal standards and detailed guidance has allowed consumers with purchasing power to define what CSR is.

What is being done to improve CSR?

Like human rights reporting, 2015 could see changes in the way that companies approach CSR.

In her piece, Bauer discusses the business and human rights (BHR) movement, which has emerged to shift the focus from the ‘needs’ to the ‘rights’ of the affected community. Bauer suggests that the BHR movement believes that there already exist sufficient legal standards to ensure corporate adherence to respect human rights “regardless of whether it is convenient, profitable, or will improve the company’s reputation.”

In my opinion, CSR does have the ability to be effective, for business and societies alike, only if companies stop looking at it as a “nice to have” and as a sideshow to the main business purpose. Without detailed guidance, CSR may continue to be used as a veneer to mask corporate behaviours that are not aligned with the wider social interest. Frameworks such as the United Nations Guiding Principles Reporting Framework will go along way to help consistency amongst companies in delivering on the Social aspects of CSR and changing their behaviours.

Richard Karmel

Mazars LLP