A couple of days ago my bible app opened with this verse of the day: ‘To do righteousness and justice is more acceptable to the LORD than sacrifice’ (Proverbs 21:3). 

This text reminded me of the way some companies deal with Corporate Social Responsibility (CSR). Rather than doing the right thing, they do the wrong thing and compensate for this by deploying CSR initiatives. There is even a special term describing this phenomenon: ‘Greenwashing’. In this context, it is no wonder that two professors from IMD (a leading Swiss Business School) published an article in 2018 with the provocative title: ‘Why nobody takes corporate social responsibility seriously’.

CSR is not optional anymore

In the past decade, CSR has become more and more popular, not in the least because it makes sense from a commercial perspective. Already in 2009, a study by McKinsey showed that two-thirds of CFOs and three-quarters of investment professionals agreed that CSR activities created value for shareholders in normal economic times. 

According to a recent article by the same consulting firm, this is true in the current COVID-19 crisis as well: ‘The way organizations deal with their customers, their employees and the broader community in a crisis is likely to leave lasting memories in customers’ minds.’ 

Beyond a marketing ploy?

Despite the positive impact CSR has on our society, there are at least three reasons why it is often seen as a marketing ploy:

• No common definition or robust standards
• Inconsistent business practices (Walking the talk)
• The way companies treat their own employees

No common definition or robust standards

CSR standards fall short on multiple fronts. First of all, there is no common definition of what CSR exactly means. Secondly, despite initiatives like the GRI, there are no uniform standards and reporting guidelines, which provides organizations with the possibility to pick and choose the standards they want to adhere to. Thirdly, and perhaps most seriously, the value of CSR reports (for instance as part of the Annual report) is severely limited.

If the same level of scrutiny were to be applied in their financial reporting, companies would be free to choose which accounting principles they would adhere to, how to interpret them and how to report on them.

Inconsistent business practices (Walking the talk)

The second reason is that there are unfortunately a number of examples of organizations whose business practices were not aligned with their CSR principles. A Google search on ‘corporate sustainability failures’ results in 46.5 million hits. It is depressing to read about all the companies (for instance in the automotive, financial services and professional services industry) that claimed the moral high ground in public, but deliberately created damage to the general public, consumers or shareholders, through their actions. 

Some CSR efforts are even downright comical. E.g. an oil & gas company that uses the greenness of the supply chain of potential suppliers in its vendor selection process, or a highly profitable financial services company with a dubious reputation, that encourages employees to paint local schools ‘to give back’ to society.

In this context also the behaviors of business leaders should be taken into account. Watch for instance this video taken during the WEF forum in Davos in 2019…

The way companies treat their own employees

If the lack of robust standards and inconsistent business practices are reasons why the general public might be skeptical about the CSR initiatives of a company, the way organizations treat their own employees is often the reason why employees are skeptical. 

A number of companies are very outspoken about their concerns for the society they serve, but, surprisingly enough, seem to be far less interested in the way they treat their own employees (who, after all, are part of that same society…).

Examples include organizations with noble CSR principles, whose recruitment practices, objective setting, performance evaluation and (re)staffing processes can be characterized as social Darwinistic. Organizations that seem to have systemic problems with diversity & inclusiveness and sexual misconduct also fall in this category.

A number of these practices are not only questionable from an ethical perspective, but they also destroy value. Value in the form of human capital, value in the form of shareholder value (financial compensation), and, last but not least, value in the form of employee engagement. 

Employee engagement is one of the biggest determinants of corporate success. Employees will be the first to notice inconsistencies between what leaders say, and what they actually do … starting with the way they are treated by these leaders.

In these COVID-19 times, many business leaders face difficult choices regarding their labor force. The way they will deal with their employees will have a big impact on the corporate memory of their organization. Notions like mutual trust and loyalty spring to mind. In this context employability related decisions around and investments in upskilling, reskilling, and career transition support are crucial.

Corporate social responsibility comes at a price

In our society organizations are free to choose to which extent they want to invest in CSR. There are several examples of well-known companies that do not (significantly) invest in CSR, without a noticeable effect on their business results. 

However, once a company decides to publicly choose the moral high ground, it needs to be willing to also invest in this. Not only by formulating high-minded mission statements, vision statements, and business principles, but also by doing the right thing (‘righteousness and justice’), even, or perhaps especially, when this comes at a cost. In order to safeguard not only their own credibility, but the credibility of corporate social responsibility as a phenomenon in our society, these companies need to be willing and able to live up to their self-declared principles, including, and perhaps especially, concerning their own employees.

A small, but highly tangible, example of a company doing the right thing, was an apparel company that had to shut down a large manufacturing operation in a developing country. Rather than selling or moving the equipment (mainly sewing machines) and inventory, they decided to handed it over to the employees in order to enable them to start their own businesses.

“If your actions don’t live up to your words, you have nothing to say.” (DaShanne Stokes)

© Dirk Verburg 2020

Disclaimer: Views, thoughts, and opinions expressed in the text belong solely to the author

Photo credits: DutchAperture