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CSR Community to Chrystia Freeland: You Do Not Understand True CSR

By Andrea Newell

On July 18, 2010, The Washington Post published an opinion piece by Chrystia Freeland where she criticizes corporate social responsibility (CSR) and goes so far as to blame it for the BP oil spill. The CSR community drew its collective breath, and fired back.

In her article, Freeland claims that “many of the business disasters of the past 24 months have been facilitated by the mini-industry of corporate social responsibility – known as CSR by those in the trade – a fetish encouraged by the philanthropies that feed off it and funded by the corporate executives who have found that it serves their bottom line.” She goes further down this road, adding, “…the heart of the relationship between business and society doesn’t lie with the charitable deeds that companies do in their off-hours but whether they are doing their day jobs in ways that help – or hurt – the rest of us.” She takes particular aim at BP and Goldman Sachs for their respective roles in the oil spill in the Gulf and the U.S. financial crisis, while she claims their shiny CSR/PR campaigns buy them goodwill. She claims that “the problem with CSR is that it muddies the waters. Goldman’s purpose isn’t to educate women; BP’s isn’t to lead the green revolution.” Freeland contends that “the job of business is to make money.” Period.

I wasn’t the only one that was surprised by this (blatantly wrong) description of CSR. CSR = charity? Businesses should only concentrate on making money and ignore everything else? Several CSR bloggers responded immediately decrying Freeland’s mischaracterization.

Chris Jarvis, of Realized Worth, agrees with her fundamental idea, that the BP oil spill occurred because “BP took their eye off the ball of doing business well,” but thoroughly disagrees with her assessment of CSR as the culprit. He writes, “Chrystia doesn’t seem familiar with the most basic understandings of CSR…Ironically, corporate social responsibility is exactly what Chrystia is explaining that BP should have been doing in the first place. Issues such as worker safety, mitigating environmental disasters and engendering the good will of consumers and stakeholders is good business and good CSR. The actual problem that Chrystia should be talking about is the fact that BP was not, in fact, practicing CSR at all. Rather, they were practicing false marketing.”

Fast Company’s Alice Korngold also wrote a succinct dissent. “CSR isn’t about puppy dogs and ice cream. CSR is about conducting business with integrity and attention to the community in a way that benefits shareholders.” She supports her disagreement with four clear points:

1. CSR, when interpreted correctly, is purely and simply about maximizing profitability. BP is an example of a company that is on the brink of financial collapse precisely because it violated its corporate social responsibility.

2. In order to maximize profits, it is absolutely necessary for companies to have workforces and customers who are educated and healthy, communities that are safe from crime and terror, and economically vibrant neighborhoods. … Companies that address such matters are wisely investing in CSR for their own interests, as well as the community.

3. CSR builds a company’s long-term value. Failure to invest in CSR is a narrow, short-term, quarterly report type of strategy which undermines the company’s long-term profitability and shareholder value.

4. By referring to BP’s Beyond Petroleum campaign, Freeland is confusing marketing with strategy. It is in BP’s interest to think about sustainability and what it will do when oil runs out. The problem is that BP talked the talk, but didn’t walk the walk.

Korngold finishes simply, “CSR isn’t the problem. It’s the solution.”

I think Emily DeMasi, of The Inspired Economist, said it best when she countered, “CSR strategists are not looking for mere philanthropy or charitable deeds or any other tertiary activity that carries a green label and takes away from the core competencies of a firm. At the heart of strategic CSR businesses examine their relationship with society and make responsible decisions based on their core functions. Michael Porter and Mark Kramer outlined this strategic CSR in 2006. They model CSR as a business activity that should be linked to core business objectives that are leveraged for increased economic and social values. … And for any naysayers of CSR out there in the business community, this is not a strategy coming from the halls of philanthropies, this is Michael Porter, father of the modern business strategy field.”

The article Trash Talking Good Deeds admitted that Freeland had a (small) point. It concurs that, of course, businesses need to make money. No one actually disagrees with this point. It goes on to say, “But this is just part of the story: corporate philanthropy, cause marketing and responsible business build reputation and drive shareholder returns. … As long as efforts are authentic, sustainable and core to business values and operations, leading companies will rise above the dissenters, disprove the naysayers and continue to focus on meeting the demands of the increasingly conscious stakeholders with both business and societal returns. The critics have spoken, but your actions continue to speak louder.”

Does anyone agree with Freeland’s argument? I didn’t find any support, not even from her friends. In a response on The Huffington Post, Philanthrocapitalism authors Matthew Bishop and Michael Green call her claim, “utterly absurd.” Sorry, Chrystia.

Again and again, CSR, done right, is shown to increase profits and benefit shareholders as well as the community. In short, CSR does make money. Which is what Freeland said was the sole purpose of business. So how could Freeland bash CSR, all the while seeming to contradict herself? Chris Jarvis concluded, “Sadly, Chrystia wrote the article without a thorough understanding of what she was talking about.”

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