The Flipside of Corporate Social Responsibility (CSR)

By Ali B. Al-Bayaa
2010, Vol. 2 No. 03 | pg. 1/2 |

Introducing Corporate Social Responsibility (CSR)

The United Nations states that at its broadest, Corporate Social Responsibility (CSR) can be defined as the overall contribution of business to sustaina­ble (UNDESA, 2007). That being said, unmonitored corporate social responsibility threatens not only individual security but the world’s security at large. This paper will attempt to demonstrate that not only would our faith be misplaced in entrusting corporations with the security of the global economy, as the recent economic crisis has clearly demonstrated, but furthermore we cannot entrust corporations with the three basic S’s of human survivability, and security.

The main issue with which this paper deals is the role of government in the process of CSR Implementation, oversight, and utilization. Should corporate social responsibility really be left up to a corporation? Could such an attitude have negative implications on fragile growth in developing countries?

This paper will further make the case for good- and demonstrate that governments must become more socially aware and responsible themselves, whether at the local or international level.

In the words of Mathew Bishop of The Economist: “The media and the public should start putting pressure back on governments to improve labor and social issues. In effect, we are letting government and politicians off the hook by pressuring the companies we work for and invest in to take on additional financial and social burdens" (Salls, 2004). The promise of government must be fully met. The case should not be made to focus on the role of business in promoting global prosperity and delivering positive social transformations, but instead on how good quality governance can bring about promising corporate and social Responsibility. This concept will be introduced as “Philanthro-Governance.”

Misconceptions of a Promising Truth

“Can we expect every decision made in one's self-interest, through market mechanisms, to result in the good for all? […] By promoting these instruments as substitutes for international governance institutions, the UN and OECD effectively undermine the ability of national governments to put forward a different approach.” Deborah Doane, Core Coalition (Fauset,2006)

The truth is, CSR has the potential to evolve into a promising tool for development, by evolving into Corporate Social Innovation;[i] a promising aspect despite the critiques. However, to set out and randomly “do good” in the world is an amusing predicament. Yes, of course states, corporations, and citizens should all take part in the quest to secure the three S’s. But, there remains a need for oversight and accountability. In her study titled “Corporate Social Responsibility – A guide for trade unionists,” Mather identifies this dilemma when she notes:

The difference between the terms ‘responsibility’ and ‘accountability’ in English may be fine but it is important. ‘Accountability’ implies that corporations are answerable to the rest of society – their duties and our rights. By contrast, ‘responsibility’ suggests that it is enough for companies merely to assume this state for themselves. This is why many trade unionists prefer the term ‘corporate accountability’.” (Mather,2006)

A call for accountability is nothing new; The 2002 World Summit on Sustainable Development marked the crowning of CSR, while Friends of the Earth led calls for a Convention on Corporate Accountability (Fauset, 2006). It is difficult to imagine how CSR can deliver promises without accountability. Hence the question: Who should play such a role? The state, of course: it is the one institution that represents its electorate (society), is built upon a solid foundation, and demonstrates an established governance apparatus. In countries where this is not the case, global institutions can substitute.

Current legislation and international guidelines, especially those put in place to define the capacity and role of global trade organizations, make it very difficult to enforce CSR, or even attempt to endorse it. Given that CSR is a matter of a corporation’s will, carried out at a time and place of its choosing, it should be recognized then that not only do corporations lack the proper expertise to determine social needs, additionaly not every corporation has “good” intentions. Who sets the definition of what is good and what is bad? The concept as it applies to many private businesses is wholly profit-driven and carried out in self-interest, and when the opposite is true then it is a mere attempt to evade criticisms.(Mather,2006) In the words of Sir John Browne, Chief Executive, BP: “This is not a sudden discovery of moral virtue or a sense of guilt about past errors. It is about long-term self-interest – enlightened, I hope, but self-interest nonetheless”. Hence the question: Can we entrust such entities (private businesses) to act independently in pursuing sustainable development? Do we continue to pretend that CSR should be unmonitored, and like the business sector it too can regulate itself? The answer is no doubt politically twofold.

However, given that both prosperous business and good governance are needed for development and the fact that even governments can be held accountable to an extent wherein 1991 UN General Assembly declared itself in favor of humanitarian intervention without the request or consent of the state involved (Mathews, 2003). If the equation of humanitarianism and sustainable development is to be guided to its proper bearing, does that not justify the establishment of a global monitoring system of CSR that holds businesses accountable as well? Without such a system, the private sector (CSR) will continue to be an uncontrollable variable in an equation that is not in the liberty of withstanding continuous miscalculation; sustainable development, especially in underdeveloped countries, is vital to human survivability and the absence of a monitoring mechanism threatens progress.

The Flipside of Corporate Social Responsiblity

The international forum where trade agreements are negoti­ated is the WTO. People could be inclined to look to this forum to discuss CSR standards regarding trade.(Oldenziel et al., 2005) Unfortunately, current international institutions, more importantly those of them affiliated with business and development, are home to a wide set of outstanding issues, be it the WTO, UN, OECD, etc At a briefing by the Brookings Institution regarding Social Corporate Responsibility and Government, Susan Aaronson (Sr. Fellow, Kenan Institute at the University of North Carolina) notes: “The WTO is in my mind a wonderful institution, but WTO has provisions that allow governments to undermine their own labor laws to stimulate trade, for example. There are no rules governing how business behaves in zones…” (Brookings, 2005) Furthermore, the WTO rules, such as the GATSii rules concerning standards and licenses limit the ability of governments to regulate the behavior of corporations (Oldenziel et al., 2005) [including social and environmental].

The effects of CSR in the developing world are usually a matter of literary presumptions and continuous debate; unfortunately, the fact is that as of this date, the world has not yet developed a proper means for measuring corporate compliance or an instrument for providing CSR oversight. As a result, MNCs may knowingly or unknowingly provide support and legitimacy to repressive regimes.(Goulbourne, 2003) CSR would create a sense of “things are getting better” despite the ineffectiveness of government; hence the positive outcome is short lived.  In the meanwhile, sustainable development on the long-run is jeopardized (Fig. A Appendix).  First, MNCs in the developing world are running away with vital resources absolutely crucial for the development of the country they operate in. Second, the funds destined for CSR projects are fractions of a corporation’s profit. Third, given that there is no universal standard of operation; CSR encourages vices in an already desperate developing world (undermining governance, , etc). It is important to remember that democratic control over national policy is further weakened by the political clout of massive multinational corporations (MNCs), whose international sales often dwarf the Gross Domestic Products of their host countries …The 200 companies that own over one-fourth of the world's productive assets exert enormous political pressure on relatively weak states through legal and often illegal behavior (Pooley,1995).

With this taken into consideration, it becomes easier to see why advocating for CSR in the under-developed world is an issue worthy of our concern; this approach emboldens private businesses in these countries (which hardly ever have the interests of the whole population at heart) while further undermining the governance apparatus in these already weakened states. It would appear to be more realistic to encourage Philanthro-Governance instead; where social, environmental and economic policy can be drafted in a fashion to best suit all the players involved. However, the issue remains controversial (Fig.B Appendix) due to the fact that there is no concise understanding of what the impact of CSR is or will be in the future.

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