The Business of Business is Business, and CSR

Dr. B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

"A business that makes nothing but money is a poor kind of business"- Henry Ford

Improving Employee Wellbeing, Creating Social Good, Sustainable Procurement and Consumption, Fair Pay for Fair Work. Some of these are used synonymously when people talk about Corporate Social Responsibility (CSR, hereafter) which refers to practices benefiting the society or developing a fair and transparent situation in which all parties involved can have a 'win-win'. The 'people-planet-profit' (3P or Triple Bottom Line) concept also falls within the ambit. It is interesting particularly for businesses since back in the 80s, Milton Friedman said 'the business of business is business and rightly so in many regards since the primary objective and also the responsibility of a business is to maximise profits regardless of how socially responsible (or irresponsible) a company might be.

Understanding Corporate Social Responsibility

CSR can be viewed as a form of business self-regulation to be socially accountable and be seen as a 'good' social entity. We live in a rather socially conscious and pro-environment friendly society where employees, customers, suppliers, and in general civil society places a lot of weight on choosing and supporting organizations that prioritise CSR. CSR is also a way how companies measure and control their impact on society. CSR can also be perceived as how a business can be organised in a particular way that could empower them to be and act in a socially responsible way. So indeed again, it's a type of self-regulation that could manifest in say, socially or environmental initiatives or strategies, without compromising on organizational goals and agreed stakeholder objectives. CSR does not have to be a distraction from a company's main goal and instead could aim at aligning a company's social and environmental activities with its business purpose and values. A lot of examples in recent years have demonstrated that CSR activities could mitigate risks, enhance reputation, and contribute to business results.

Surely, therefore, the contributions via CSR initiatives could be both positive and negative (also known as externalities) – to the economy, environment, and wider civil society. With the increasing realisation of business leaders that businesses may not choose to be driven solely and exclusively with a profit motive, and that their actions can be responsible to do what's best not only for their shareholders but also hit the Triple Bottom Line, i.e., people, planet, and global civil society. Typically, CSR list four categories of responsibilities that organisations can cater to – environmental, ethical, philanthropic, and economic. Today, we have examples of companies that rebranded themselves as B Corporation (B Corps), social purpose corporations (SPCs), low-profit limited liability companies (L3Cs), and a variety of 'green companies'.

Examples of 'good' CSR initiatives - I

One of the early 'good' CSR initiatives was taken up by Starbucks when they secured the 'Fair Trade foundation' certification thereafter all their products had the Fair-Trade logo (resembling the Chinese 'ying-yang' sign) on them, this logo ensures that farmers and everyone else in their supply chain is all paid fairly and free from any exploitation. Starbucks remain the largest purchaser of fair-trade-certified coffee, globally. Fair Trade initially started as a social movement and stated their goal "is to help producers in developing countries achieve better trading conditions and to promote sustainability".

For businesses, it is a matter of being fully aware of their responsibilities towards the society since it is about delivering value for business and society via creating social, environmental, or economic (similar to people-planet-profit) benefits thereby ensuring the sustainability of a company. Interestingly, most of the business CSR initiatives these days are connected to SDGs or the global goals – so whether it is about ensuring A) Good health and well-being (i.e. global goal 3) – this could be ensuring a good work-life balance, safety at the workplace, supporting the mental health of employees, amongst others; or B) Decent work and economic growth (i.e. global goal 8), particularly about the sharing or gig economy where the workers are not considered to be 'employees and therefore no guaranteed benefits or entitlements; C) Responsible consumption and production (i.e. global goal 12), which does connect back to the Starbucks example, and also how certain University campuses in the US were termed as 'fair trade' universities where students and academic faculty would only buy and consume products that are fair-trade labelled. Equally important for some of us who encourage and practice increased recycling and awareness, and also D) Partnership for goals (i.e., global goal 17) where newer forms of institutional arrangements are created and sustained, walking away from the generic public-private partnership models towards more inclusive and innovative ways of actor engagement via public-private-people partnerships.

Embedding CSR into Company's Culture and Philosophy

Research by Cone communication shows that over 60% of US citizens expect businesses will be instrumental in social and environmental change in the absence of government regulation. Interestingly, about 90% of surveyed consumers said that they would purchase a product because a company supported a social cause or environmental challenge that personally appeals to them. These initiatives could take many forms, for example, A) Proactive environmental efforts (e.g., reducing carbon footprints, recycling innovation, managing e-waste), B) Funding philanthropy (e.g., Tom Shoes whose slogan is 'one for one' where they donate one-third of its net profits to various charities supporting physical and mental health), or C) Ensuring ethical labour practices – treating employees fairly and ethically, including the ones outsourced in the supply chain, or D) Volunteering – how Vodafone World of Difference Challenge has helped with community development in most parts of the world already. While creating CSR opportunities for improving the marketing image of a company, if not coming from a moral conviction or altruism, could backfire if the businesses fail to follow through over time. So, it has to become a part of a company's culture that needs to be embedded in the core.

Examples of 'good' CSR initiatives - II

Lego which is now a household name has invested a fortune to address climate change, developing alternative energy usage, and reducing waste. Since this is also a part of the company's philosophy, Lego's environmentally conscious steps include reduced packaging, and also using sustainable materials. This is somewhat similar to Ben & Jerry's (you have tried their ice creams), whose core goals have always been around supporting local dairy farmers and investing in the community where they have operations. Again, both the examples above have a direct relation to more than two global goals. Johnson & Johnson, another familiar brand, focuses heavily on reducing its environmental impact by investing in various renewable energy sources. At the global level, they also work towards providing cleaner and safer water to communities.

Proctor and Gamble (P&G) is another example since their development of the two laundry products, Ariel and Tide, was sourced from identifying an environmental problem. Their research demonstrated that the most significant environmental impact that our laundry has is the energy used to heat the water in washing machines. 90% of the energy in a load of wash comes from heating water to do it, these contribute to about two-thirds of all the greenhouse gas emissions in the Tide lifecycle. So, they develop products that could easily use cold water for washing thereby reducing the total carbon emissions significantly as well as helping to save up to $150 a year on household energy bills. At the same time, it is not what the companies do - e.g., becoming environmentally friendly or 'going green' in its operations - but also helping to generate a sufficient amount of awareness in the society, for example, the adverts or packaging of P&G's product Ariel would inform customers how to save energy by turning down the washing temperature of washing machines to 30 degrees Celsius or below.

Similarly, Plan A by Marks and Spencer (M&S) has the goal of building a sustainable future by enabling their customers to have a positive impact on wellbeing, communities and also the planet through everything (process and product) that the company does. For example, in spring 2021 they have launched their most sustainable denim range that was made using 86% less water, kinder chemicals and 100% responsibly sourced cotton. During the pandemic, the company distributed more than 11.8 million meals to those most in need and also raised GBP 8.3m for NHS Charities Together in the UK through their M&S rainbow sale.

Governance of 'good' action is now a requirement, and no longer optional.

In recent years, however, companies cannot brag about 'good' practices and their 'green washing' philosophy anymore since the EU has now a) product requirements criterion, b) an environmental policy audit system for organizations, and c) EMAS certification, as a way of governing progress and control of eco-management. So, what was considered to be a 'proactively good' social action by a company is now somewhat mandatory by law. For example, EU's principles for global trade and sustainable development, development of sustainable development criteria and CSR in individual trade agreements can impact sustainability assessments of trade deals.

Activities also need to be aligned with the companies' business purpose, the values of the companies' key stakeholders, identifying the local or glocal needs that the company (local or global) can serve in a particular community where their operations are, amongst other considerations. For example, in countries that lack sufficient government funding for public health or political will, business organisations can step in with philanthropic funding for clean water and sanitation. A strategic CSR move could create various levels of continued 'win-win/s' for a company, its wider list of stakeholders, and the community.