How CSR became big business

Whenever society faces a crisis there tends to be a wave of moralism. So it is not surprising that, as the private-equity crisis has transformed into the public-debt calamity, there is now much discussion about the correct conduct of business and finance.

The last time such a significant conversation occurred on these matters was in the mid-1990s. Back then, economic turmoil and the dramatic downfalls of corporations and businessmen like BCCI, Polly Peck and Robert Maxwell – all tainted by accusations of fraud – led to the promotion of ‘corporate social responsibility’ (CSR). The ideas behind this concept were articulated in a landmark inquiry by the Royal Society for the Encouragement of Arts (RSA), Tomorrow’s Company: The Role of Business in a Changing World. It seems fitting, therefore, that the RSA’s current chief executive, Matthew Taylor, recently sought to articulate his vision for ‘enlightened enterprise’, laying out how ‘business can combine a strategy for competitive success with a commitment to social good’.

Looking back, though, it seems many of the corporate contributors to the original study might have been good at talking the CSR talk, but they were considerably less interested in, or capable of, walking the CSR walk.

Quite a few of the companies, including British Gas, British Airways and National Grid, were relatively recent creations of the privatisation boom under the previous Conservative administration. In their cases it is reasonable to suppose that their chief executives were keen to get behind the calls for change. Many others, such as electronics company Thorn EMI, transport and logistics firm Ocean Group, and the IT company FI Group, got caught up in the late-1990s wave of mergers and acquisitions, and so ended up being subsumed or disappearing entirely. No doubt, quite a few individuals got rich in the process.

Some of the original supporters of CSR – like The Strategic Partnership (London) Ltd – were more like tiny, shoestring-budget quangos, staffed by individuals whose intended policy clout far exceeded their business significance. At the other end of the spectrum, among those who pontificated about what makes a responsible company, were the leaders of Barings Venture Partners Ltd. Barings Bank collapsed in 1995 after one of its employees, Nick Leeson, lost £827 million due to speculative investing. So much for being responsible.

Tomorrow’s Company was a product of its time. Bemoaning the absence of non-financial measures for business success, it fed into the growing demand for procedural audits and targets that were to become one of the emblematic pledges of the New Labour government. And, in what was to become typical New Labour lingo, the inquiry demanded greater ‘dialogue’ and ‘inclusivity’.

The RSA inquiry complained of the ‘adversarial culture’ of the business world. This heralded later attacks on various supposed institutional cultures, including the ‘canteen culture’ of the police force, critiqued in the 1999 Stephen Lawrence inquiry, and the ‘club culture’ of the medical profession, lambasted in the 2001 Bristol Royal Infirmary inquiry. There have also been critiques of the army’s ‘barracks culture’ and, more recently, of the ‘macho culture’ of the International Monetary Fund (IMF). This was following the controversy involving the former IMF chief, Dominique Strauss-Kahn, who was claimed to have been protected by a French ‘culture of secrecy’.

The meaning of CSR today

Matthew Taylor, in his recent exposition of ‘enlightened enterprise’, also asks for a ‘shift in our national culture’. But whereas the 1995 RSA study called for change in response to the ‘increasingly complex, global and interdependent’ conditions within which businesses were allegedly operating, for Taylor the key problem to be corrected is human nature.

‘[H]uman beings are complex social animals’, he suggested in a recent speech, ‘influenced more by our nature and context and less by calculating, conscious decisions, than we intuitively believe’. Like other adherents of the new orthodoxies of behavioural economics and evolutionary psychology, Taylor talks of the need to create ‘more capable and responsible citizens’.

So what does all this have to do with business behaviour? One important clue was provided by Mark Goyder, programme director of the original RSA inquiry. He brought up ‘the notion of business as the most important agent of social change, in an age when governments are redefining and limiting their own sphere of influence’. Taylor, for his part, identified the idea of behaviour change as a key aspect of corporate responsibility and explained that the Lib-Con coalition has set up its own behaviour-change unit and that ‘the idea that we need to move from a government-centric to a people-centric model of social change is central to David Cameron’s vision of a Big Society’.

Against the backdrop of these two elements – the changing role of government and the view of ordinary people as little more than natural impulses on legs, as beings who need to be nudged into changing their behaviour – the new role of business becomes transparently clear. Businesses are to act on behalf of governments that can’t be trusted and for people who don’t know what’s good for them.

Taylor is quite explicit about this. ‘[T]he state’, he noted, ‘has many competing objectives and when it uses its power to nudge it opens itself up to charges of paternalism and social engineering’. Businesses, however, have the ability ‘to build on a relationship based on choice and consent, and in some cases a good degree of trust’. All these qualities are presumably no longer to be expected, or demanded, from government.

No doubt, many in the business community will jump at this invitation to take over the levers of power by acting as de facto school prefects on behalf of states that no longer want, or cannot be trusted, to rule. Many will also be excited by the ability to play an ever bigger role in the government’s nudge agenda and to take on the mantle of responsible agents for change.

From profits and growth to ‘performance with purpose’

Today, CSR is big business. And so the success of enterprise in this age is not to have the spirit that took people to the Moon, but to play a part in slimming waistlines and reducing carbon footprints. It’s simply a question of ‘selling the right stuff’, as PepsiCo’s CEO Indra Nooyi has put it. Nooyi has committed her company to ‘performance with purpose’, which includes providing healthy snacks. Likewise, the Mars Corporation’s new focus has little in common with the bold ambitions of the space-race era. It now wants to concentrate on selling products ‘as part of a balanced diet’ and on encouraging people to get ‘fit not fat’.

Taylor is aware of the possibility that not all of us would choose to pursue the ideals that he and his fellow nudge-enthusiasts espouse. To counteract this, business has to take the lead, ‘prompted by NGOs in a sense acting as quasi-regulators and intermediaries with consuming households’. The RSA has taken the lead in this respect, working with Shell and taxi drivers to make fuel-efficient behaviour more habitual.

Ultimately, Taylor comes across as gullible for buying into the idea that corporations want to put social responsibility first. He even cites ‘Flora’s cholesterol-cutting margarine’ as a service in protecting people’s health. This despite the fact that Flora’s claims are highly dubious, and the purported link between high cholesterol and heart disease is increasingly disputed and discredited. Perhaps Taylor will be promoting anti-ageing creams next?

A major error of CSR proponents is to assume that the key determinants of success for businesses and their employees is not making money, but being fulfilled in some other way. Taylor cited a Gallup survey which showed that ‘beyond obvious basic factors like health and a reasonable income, the key determinant of whether someone described themselves as thriving in their lives as a whole was whether they saw their employer – or manager – as a partner rather than a boss’. Here, he sounds rather like one of his predecessors at the RSA, Charles Handy, who, in answer to the question ‘What is a company for?’, said: ‘To talk of profits is no answer because I would say “of course, but profits to what further purpose?”’

CSR: the displacement of responsibility

But real profits, good health and reasonable incomes cannot so readily be assumed. They still have to be achieved, and cannot just be dismissed as ‘obvious’ in a desire to promote a new business agenda. In fact, the CSR agenda has helped businesses get away with ignoring the self-expressed needs of its employees. British Airways, for instance, was commended for its social and environmental reports while simultaneously undermining working conditions for its staff.

In fact, the most ideal CSR scheme focuses its supposed benefits elsewhere – typically it is directed at poor people ‘without a voice’ or better still on animals or the environment that can’t talk back at all. That way, businesses can offer token sums and gestures to impoverished communities and satisfy eco-activists and their media groupies at the same time – all the while compelling staff to subsidise the schemes by volunteering their own time and energies.

It is not at all obvious what it is about businesses, and still less self-styled civil-society groups and NGOs, that makes them legitimate representatives of the public’s needs. For the government, recruiting business to its behaviour-change agenda seems like a further evasion of accountability. Ultimately, whatever companies say about putting people and the planet before profit, they only ever have a partial view of the world.

Only states have, and are authorised by the sovereign people to promote a more universal view. Whether society should be aiming for healthy living, sustainability or anything else should be part of a broad, democratic discussion, not sneakily foisted upon us by businesses acting under the guidance of NGOs, policy wonks or ministers looking for ways to show they’ve ‘made a difference’.

The original advocates of CSR focused their attention on culture, as do their supposedly more people-centric descendants, because it is at this level – the level of the informal relationships between people – that the potential for contestation and resolution initially emerges. This can be a messy business, and one that states that doubt their own direction and purpose are loathe to engage in. They would rather outsource this messy function to others, and attempt to replace all those informal, uncertain and uncontrollable interactions with more predictable formal codes, regulations and responsibilities. That they find willing lap-dogs for this in the ethereal world of think tanks, as well as businesses that are suffering from their own crisis of confidence, is not that surprising.

However, if we truly want to change the world then it is ordinary people who will have to assert what really matters to them. CSR – it has been noted by many – is invariably a by-product of business success, not the cause of it. Likewise, it is people’s aspirations for a better world – however we imagine it – that should be the only prompt for the kind of behaviour we adopt.

Bill Durodié is an associate fellow of Chatham House, London.