By Ksenia Zheltoukhova, CIPD Research Adviser
An article in The Sunday Times challenged the value of CSR policies, and the motives of management in showcasing both their own and their company’s virtues. While some of the actual initiatives may be nothing more than image management, I believe there are three reasons why it’s wrong to dismiss the idea of a corporate conscience just yet.
Firstly, the argument that making a profit is the best way for a firm to help society assumes a single type of value that is exchanged in this relationship: the total amount of financial good produced. Indeed, the compliance aspects of ‘paying the bills’ (investors’ returns, salaries, even green taxes) represent the basic obligations of any successful firm. However, there are more complex – but possibly more valuable – aspects of this relationship that we aren’t yet that good at measuring: the development of human capital, social networks, and trust. Thus, the methods of how financial outcomes are achieved create an often unpredictable degree of risk both to the firm and society, which can affect the overall amount of good created both in the short and long term.
Secondly, the profit-led argument assumes a narrow view of business stakeholders – one centred on shareholders (and, possibly, customers who must be satisfied to maintain shareholder interests). Keeping important stakeholders happy is a valid concern for any business, but that rule should apply to the non-cash investors, too. People working for companies increasingly have a choice over where to take their skills (aka talent), and how much to contribute on a day-to-day basis (aka employee engagement). These investors of human capital are motivated by more than the salary alone, but are attuned to the quality of experience they can gain in a particular company, as well as the external and internal reputation of a firm.
Thirdly, self-regulation of business – whether it is called CSR or not – is key to the advancement of society. Many ‘responsible’ practices, which are now protected by law, previously relied on firms’ voluntary decisions not to tolerate child labour or poor ‘health and safety’ – whether it was profitable to do so or not. Neglecting to explore ways that allow firms to both ‘do good’ and make a profit is an easy but dangerous choice, as it limits solutions to the current paradigms and to the types of business models we know today. Considering multiple stakeholders at once is more difficult, but it offers scope for innovation.
Where The Sunday Times article makes a strong case is that human nature is flawed. There will always be temptations to look simply at profits, to benefit the investors at the expense of the people that work for you and to reach for the low-hanging fruit. The good news is that responsible behaviour is down to an individual taking courage to behave in a more considered way within their remit; so every virtuous leader counts, as we discussed in our recent report.
It is crucial that we carry on the debate on the premise and societal responsibility of businesses: for someone to be able to critically reflect on their decisions. Our ongoing Profession for the Future strategy intends to support HR professionals to develop that critical capability and make informed choices about the type of organisation they want to create.
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