Tuesday, August 2, 2011

Corporate Social Responsibility (CSR)

 - when Darwin meets Nicolas LĂ©onard Sadi Carnot

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Back in February of this year, David Vidal asked a hard question at a Global Reporting Initiative (GRI) and NYSE Euronext hosted breakfast:

What are the top three reasons for your company's reluctance to embrace sustainability—and to adopt sustainability reporting?
Aman Singh Das, 11 Challenges for Corporate Sustainability.

Before I explain the Q&A further, it’s only fair to address the demographic to which the question was proposed. The audience is the already converted Corporate Social Responsibility (CSR) advocates representing companies that have recognized the link between sustainability and their bottom line. They are the farsighted people who recognizes the consumers and the producers both benefits from a sustainable conversion of their systematic operational thinking. They want to lay down the bet that the first to this circular modality of sustainable and social business thinking will win in the long run, albeit they acknowledge the short term squeeze from the idiots making last minute profits from the current model and betting the world will self-destruct in the year 2012.

I will leave my criticism of the kind of “race to the bottom” thinking for another day. The reality of those advocates is echoed by their senior leadership’s refusal to step in too far by combining social and environmental interests with their corporate interests. There may be plenty of media events and PR material in print to advance their market agenda in this direction, but most have yet to take the pledge for serious sustainable reporting and practices. Perhaps there remain ample amount of good lawyerly advice informing them of their fiduciary duties to the stockholders to maximizing profit at all cost. But as I noted yesterday: China, the largest and fastest growing market is demanding a circular economy and proactive business practices. While enforcement is an issue, I’ll bet China will be quick to enforce this kind of sustainability laws against foreign owned interests and operations.

So be warned, to compete in the coming years of the global market place, serious environmental and social compliance and reporting along with proactive voluntary actions will yield significant benefits for your company.

That is beside the point. Vidal’s question drove to the heart of the matter for the advocates of today. The answers provided a glimpse of insight into the fierce defense of linear models and profit margins. This is the ugly face of our adversaries, the enemies of the people, planet, and future profits. The defenses to a fundamental sustainable transition under CSR type advocacies include: doubts about the unknown, liabilities, resource costs, lack of global standards, and simple fear and denial.

I run into this list of worries everyday. When I try to explain to people about social entrepreneurship, their reactions include confusion, criticism, and lack of trust. “Lifestyle” company is what they call a social driven company and there is a slight undertone of illegitimacy. At the same time, the social practices are liability to their investments – they fear they cannot explain properly why we should make a few dollars less while helping advance social causes a bit more. These people often raise a Darwinian defense: let the weak perish.

But the kind of evolutionary thinking fail to take into account for the laws of thermodynamics - the system will balance itself, either violently or peacefully. The people will protest, and these protests will be effective as we have seen in China. Let this be a lesson to the American manufacturers and producers: make amends now with the changing market place or be replaced by an operation under the full force of CSR model.

As for other legitimate doubts for lack of global standard, resource costs, or liability issues under some fiduciary laws, my thinking is that if enough businesses lead the effort and start the practice of corporate social responsibility, then a global standard may emerge, costs will equalize, and laws will change. (There are many L3C type legislations on the table in the U.S.) I remain hopeful; in fact, I am betting my career on this.

For more on CSR,  See Archie B. Carroll, Corporate Social Responsibility: Evolution of a Definitional Construct, International Association for Business and Society, 1999).

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