Monday, 16 February 2009

Corporate Social Responsibility - What companies should NOT do

A much researched and written about topic, where extreme views tend to sway with the season. My friend and ex colleague, Sandip Ghose wrote nicely about it a few days ago in his blog. I am posting here, a personal perspective, rather than a research paper !

That it is fundamental today for any business, large or small, is more or less a given. Motives differ. For some it’s the warm feeling of doing “good”. For some it’s a washing away of sins. For some it’s a risk avoidance measure, lest they be shot at by pressure groups. For some , its just the fancy thing to do – it seems to be a catching trend, so lets do it. For others its simply the way they want to do business. Whatever be the motive, it is here to stay and has to be given the most serious consideration just like any other part of the business.

The Economist argues that much of much of the initiatives in this area are often misguided and I agree. So my perspective begins with what a company should NOT do.

It should not simply donate money. The company’s money is its shareholder’s. If they want to make a donation, give them the money and let them donate. Its not the company’s business to donate, whatever be the cause, for its not its money. This is the Bill Gates approach – he donates; not Microsoft (at least not in any substantial way).

It should not undertake activity that is not somehow related to its business. Fighting AIDS in Africa is very laudable, but it has nothing to do with making and selling chewing gum in Japan. Activities which are completely unrelated are not sustainable.

It should not seek to impose a culture or expectations on the world – for example western companies seeking to influence matters such as free speech, right to unionisation, religious freedom or the Tibetan cause in China is completely unacceptable. Its none of their business. Equally enforcing work practices from one part of the world to everywhere else is inappropriate. Labour rights is fine, but do we want the French 35 hour working week everywhere ? What about the ease or difficulty of laying off people ? There cannot be global standards on these without reference to the local social, legal and practical considerations.

It should not embark upon initiatives without a full understanding of what its getting into. A classic case is bio fuels in the automobile industry. This seemed to be a good thing. Companies were pushed into promoting bio fuel usage. And what happened last year – price of food shot up and, at least, one of the reasons attributed to it was the amount of land being devoted to growing crops for bio fuels. These are ticklish issues, Society and governments should take calls on such tradeoffs and companies must follow. They must not lead. Its tempting for pressure groups to push companies because they are the easiest target,. This is wrong. It is governments, reflecting the society, who must decide, however messy that process might be.

And companies must not do it solely for the publicity. Unfortunately this is too often the case, prompted in part, by misguided regulations that require publication of work in this area. So if you have to say something, you have to do something, to say something. So do whatever is the easiest. Terrible way to "discharge" your social responsibility. Better not to do, rather than do something because it has got to be done.

There is a nice discussion with Daniel Franklin, the executive editor of The Economist who says “even well-intentioned activities of businesses can end up not doing any good at all in ways that might surprise". Click here to listen to the discussion (unfortunately requires a subscription).

Make no mistake – I am a passionate believer that companies must be very socially responsible. But I deliberately started with a post on what they should not do; simply to illustrate my point of view that everything that is good to do, is not necessarily good for companies to do.

Tomorrow, I’ll post on what I believe corporations should do.


Prashant Das said...

Dear Ramesh,
I have perchance came across your blogs on CSR. They are simply outstanding. As an Editor on CSR TIMES (monthly publication from India), I'll be grateful to have your permission to publish your blogs in CSR TIMES' forthcoming issues.
Also, you may consider to become a regular columnist on CSR for the magazine.
Awaiting your response.
Prashant Das

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