It’s easy to make a buck. It’s a lot tougher to make a difference.
—Tom Brokaw
One of the most telling signs of a system in trouble is when organizations and people start adopting practices that seemingly advocate methods that are contrary to the very system in which it is operating. Corporate social responsibility (CSR) is a theory that suggests that organizations have responsibilities beyond those that are obligated by law, extending the definition of an organization’s operations beyond what must be done as required by national legislation. The obligations covered by CSR go beyond the normal financial considerations such as return on investment to shareholders and instead place responsibility for meeting the needs of wider environmental and social stakeholders. In addition, CSR extends the idea of stakeholder beyond those of the shareholder, customer, and supplier into the wider social context, suggesting that the organization ought to consider its impact on the community, the society at large, and the planet. The concept of organizational responsibility therefore falls outside the traditional organizational boundaries into areas of social and environmental impact of operational decisions and actions, with a view to the creation of a sustainable future. Often built as a policy, an organizational code of conduct, or corporate citizenship, the CSR agenda within the organization ensures that the organization operates successfully while avoiding the associated costs to the environment as well as protections in areas such as health and safety, employee care, human rights, and community concerns. Since the 1990s, there has been a growing body of work promoting the importance of the CSR agenda with leading proponents arguing the essential nature of extending the understanding and role of organizational stakeholders.
But CSR is more than providing a more acceptable or a friendly face of capitalism. For economists, CSR is a convenient method by which capitalism can adapt to the pressures for more responsibility within the free market system. The government threatens regulation that the organizations wish to avoid, consumers show support for more “responsible products,” and employees are attracted to working in organizations that adopt a socially responsible agenda. But in a system where the rule of law, which is based on contracts, does not protect those that the organization does not have contractual obligation to doesn’t necessitate a strict adherence to, or adoption of, a CSR agenda, beyond what is in the organization’s own interest. Therefore, those who have a stake in the external costs created by the operations of the organization do not form part of capitalism’s obligations and probably remain outside the scope of CSR initiatives that the organization chooses to adopt. The fact that organizations have to produce policies to promote doing good is a sad indictment of the possibilities of the capitalist market system in promoting a broader definition of accountability and delivering on obligations that are moral. It is a wake-up call to say that the capitalist system doesn’t work for the betterment of humanity.
The increase in CSR programs and more recently the adoption of corporate accountability programs have been the result not of market forces, or a growing morality among CEOs, but rather of an increased level of activism from pressure groups and consumers. During the 1970s and 1980s there were a series of public scandals, environmental disasters, and human rights abuses perpetrated by big business that exposed Western consumers to the true level of the external costs of the products they were buying. Particular organizations were exposed, as was a growing focus on specific industries, all caught out causing widespread damage to the community in which they were operating. In the wake of appalling breaches of health and safety, chemical and oil spills having a devastating impact on the environment, and illegal activities, organizations began to take note of the impact bad behavior and operational practices were having on their reputation, which in turn impacted the share price. By the 1990s consumer activism shifted from a focus on environmental and health concerns of the previous decades to wider socio-political abuses, such as the use of child labor, poor working conditions, and corruption.
The resulting impact of media exposure and consumer pressure on the bottom line and the occupying reputational damage was great enough to hurt business that no amount of marketing spend or media training could put right. But organizations that were caught in a CSR disaster did not respond out of a moral code of doing the right thing, but rather as a business response to the need to reduce the level and strength of the voices of opposition and activists and the subsequent impact on profit levels. In the first instance this took the mode of increased dialogue, developing voluntary codes of practice, the motive to avoid tougher government regulation that would move significant amounts of ought to activities into legal obligations that would add additional cost to operational costs. But the codes had a second and more sinister agenda, to still the voice of the activists and move them from a position of being in the driving seat of the public CSR agenda to gaining control by letting their arguments be heard but restricted to the boardrooms. The arguments shifted from an intrinsic sense of the right thing to do to placing the onus for doing the right thing in the context of a business plan, which had to demonstrate a return on investment. The hope that CSR would bring about self-regulation of moral conduct and corporate citizenship has been successful only in part. Part of the issue is that there has not been a united or credible voice in society to define responsibilities that an organization should voluntarily adopt beyond legislation and regulation. Since the issues that CSR focuses on, such as employee welfare and external social issues, are not core priorities for management, there is little incentive to adopt a proactive approach to socially responsible business decision-making beyond the immediate concerns of the business cycle.
Hierarchy of Corporate Responsibilities
Leisinger in his paper “Capitalism with a Human Face: The UN Global Compact” presented a model of an organization’s hierarchy of corporate responsibilities with a continuum, which places corporate philanthropy at the pinnacle of corporate responsibility excellence, through to the essential of complying with regulation at the bottom of the hierarchy. The model outlines the way in which CSR divides into areas of legal compliance, good management practice, and those things considered as optional extras; it is interesting to note that citizenship is based on strategic decision-making, not moral obligations. Leisinger states that “companies . . . add value to society and the national economy by providing products and services that meet customer needs or enhance their quality of life” (Leisinger, 2007). This implies that the focus of CSR is on the organization’s operational confines rather than the role of the organization in the context of wider societal needs.
Leisinger’s model outlines the essentials of CSR as ensuring that the organization is working within the confines of local, national, and global laws and regulation to ensure that the organization does not act illegally avoiding the consequences of being caught out, in regard to both legal action and the accompanying reputational damage. In the UK, these laws will cover a variety of areas of operation, including equal rights, health and safety, and employment law in relation to human resources, consumer regulations in regard to product and services provided, financial regulation and tax laws to avoid fraudulent activities and environmental legislation. The use of regulation to manage otherwise socially irresponsible actions by organizations demonstrates the difficulty of promoting voluntary CSR while organizations are pursuing a profit agenda. It is interesting to note that the concentration of essentials covered by Lesinger, in regard to good management practices, is focused on protecting the organization from legal action, rather than protecting the society from the action of the organization. Again CSR in this respect is less about the positive contribution that organizations can make, but rather protecting the profit that the organization can generate and the subsequent return on investment to shareholders. Employee wages, training, and benefits are covered in this dimension, but only in regard to employees improving their employability rather than releasing their talent potential or improving equality within society.
The ought dimension of Leisinger’s Hierarchy of Corporate Responsibilities refers to the actions of organizations that go beyond merely satisfying the legal requirements, but may be expected by social pressure. In the UK, there are an increasing number of organizations that promote their credentials, through signing up to voluntary accreditations; this is demonstrative of the type of actions that fall into the ought category. There is an expectation by consumers that organizations will act responsibly toward the environment, and certification by groups such as the Carbon Trust is promoted as good practice. Investors in People, People Management Standards, Quality Management certification, and Environmental Management certification are regularly cited as requirements for many supply chain operations. Although not legally necessary, many contracts, especially in regard to public sector contracts, require such certification to be in place as an assurance of good management practice. In this respect such practices are part of a strategic decision to support business development. However, there is also an expectation by the public that organizations either will support charitable or community efforts in regard to allowing employees to take part in fundraising during work time or will support a nominated charity. Although these actions may not directly contribute to profits, they do support positive marketing and public relations and help build a positive reputation for the organization. Charities or community programs are usually aligned to promoting and supporting the brand image, and the amount contributed, both in time and in resources, is usually little more than a drop in the ocean in comparison to profit.
The can dimension in the Hierarchy of Corporate Responsibilities applies to those actions and activities that an organization takes that could be considered as nice to have; that is, they apply to organizations being involved in activities that do not necessarily deliver a direct benefit to the organization, but use the skills, knowledge, and resources of the organization for doing good. Examples Leisinger gives are “pro bono research, community and neighbourhood programmes, volunteerism and donations” (Leisinger 2007). However, it could be argued that for those individuals suffering from poverty, hunger, or preventable diseases or communities that are suffering deprivation, it isn’t nice to have clean water, sanitation, healthcare, or education programs, which are considered necessary in other parts of society. When considering the proposed basic goods of Temperatism, health should never be considered as anything other than a must-have for any section of society regardless of nationality, culture, or wealth. Anyone who has survived a life-threatening illness would state that access to healthcare that improved their quality of life and cured their affliction wasn’t something that was nice to have, but necessary in regard to their human rights and their humanity. Vaccinating children from curable childhood diseases, or providing advice in regard to sexual health in Africa, for example, should be absolutely necessary in regard to the moral codes and basic humanity.
Self-Interest Supplants Social Interest
The model of Hierarchy of Corporate Responsibilities demonstrates once more that capitalism continues to reject a social argument for a self-interested approach. CSR demands that it is not acceptable to advocate taking action for the sake of doing good, turning many conversations in boardrooms from how the organization could minimize the external costs of their activities to how the CSR agenda could generate profit and a return on investment. Those who advocate CSR within business are not interested in the social or environmental benefit, or the contribution that the organization makes outside of its own profit agenda. Rather the concern is in regard to the benefits that CSR could deliver to the organization’s performance. Lean and Six Sigma programs were introduced to reduce waste, because there was a bottom line benefit in doing so. The environmental benefits gave bragging rights to the organization, to increase its reputational kudos, but many of the green projects were already lined up, and analysis shows that a great deal of green washing has been going on to pacify those who might seek to interfere in the market. Being green or socially responsible isn’t an end in itself, but a useful addendum that businesses use to promote products and services when in fact it is little more than business as usual dressed up in responsible clothing.
CSR has been and continues to be a voluntary program with individuals and organizations choosing to take action in areas they wish to focus on, instead of areas that they really should, morally, be focusing on. CSR provides an alternative to enforcement and government regulation, while failing to provide an aligned and concerted program that can have the impact and drive action that is really game changing, especially in the realm of environmental concerns and poverty alleviation. CSR continues to position management as benevolent do-gooders, seeking guidance and help from interested parties, to enable the organization to act in a responsible manner for the benefit of communities, society, and the environment while conferring the responsibility for solving the most pressing social and environmental issues onto government and society as a whole. Being seen to act redirects the ire of activists rather than directly addressing the question of the obligation of the organization to have a positive impact in regard to the true cost of their activities on the wider social and environmental community in which they operate.
Capitalism was not so much tamed by the CSR agenda, but rather given a facelift. The very actions and the resulting outcomes that had incited activists to action in the early 1970s reduced in occurrence and organizations’ fixed processes to limit shocking events in order to protect valuable brands and remove the taint of being irresponsible. But the CSR agenda has done little to curb the excesses of the capitalist agenda. Abuses continue, even if they are not as obvious. Under the guise of lean manufacturing and business re-engineering, there is an increased reliance on short-term contracts and subcontracting, which has meant that many workers now lack basic working rights and minimum standards in regard to their working conditions.
Big businesses have put greater pressure on their value chain expecting the suppliers to bear the cost of good corporate citizenship, while at the same time exerting greater commercial pressure in regard to pricing. Globalization has exacerbated the issue with outsourcing and relocation of operations to countries that don’t practice the same standard of working regulations or legislative protection as that enjoyed by workers in the West. Occasionally organizations are caught out when their supply chain is investigated, but more often than not, the incident is brushed away with a level of deniability because the abuses are occurring lower down the supply chain, rather than in direct management control of the organization. Employee welfare is often considered to be a CSR program for organizations, sometimes occupied by awards such as Great Places to Work. I have to wonder as to why any organization would want to be anything other than a great place to work. We all laugh at the antics of certain organizations because of their ability to both shock and humiliate the sensibilities of those pursuing great customer service, while at the same time demonstrating an ability to turn excellent levels of profitability. The old adage “treating them mean, keeping them keen” seems to work against all sensibilities of what is right and proper.
But in the twenty-first century it is absurd and abhorrent that organizations believe that it is appropriate to pay people the lowest wage possible often with an unarticulated threat, that there are plenty of people out there looking for work, which keeps people in a place of work where they cannot afford to live, despite working full-time. In workplaces that have begun to resemble a modern-day parody of the Victorian workhouse, the desperate and destitute work in misery alongside each other, imbued with the hopelessness of their position. Society seems to accept and excuse the right of employers to treat employees as little more than cannon fodder. HR wrings its hands, discussing the new psychological contract that seems incredibly one sided and yet frets over the lack of employee commitment, engagement, and the resulting lack of productivity. Reina and Reina (1999) argue that “low trust impedes organizational leaders from achieving objectives. Low trust eats away at the bottom line and the overall health of the organization.” The corporate machine owes the worker nothing and in return it expects discretionary effort and loyalty. Instead what is created is a talent embargo, where individuals find that their talent is not being used, or refuse to put their talent and skills to their full use, and organizations devise new systems and processes that dehumanize the workplace and reduce human effort and ingenuity to little more than the odd bright glow.
A historic problem with CSR is in the way that it has often to provide a means to measure success and achieve accountability. With managerialism enforcing a culture of managing only what can be measured, the gap in credible measurement has slowed the impact that CSR policies could have on the way in which organizations operate. However, in the last decade “there has been an increase in social, environmental or sustainability reporting and some advances in terms of strengthening reporting guidelines and methods to overcome the syndrome of ‘green glossies’ that are more about PR than meaningful disclosure” (Utting, 2008). Examples of social indices include the Domini social index and the Calvert social index. Both provide guidance to institutional investors regarding the CSR performance of organizations based on clear criteria. Other organizations include CSR information in their shareholder reports, and many have adopted the triple bottom line model: People, Planet, Profit. However, the majority of organizations fail to report progress in regard to CSR, and the range of issues that could and should be tackled in regard to external costs to operations leading to inequality or injustice are rarely mentioned or covered either in shareholder reports or in CSR policy documents. Many corporate leaders and their employees would struggle to explain what their CSR policy included, and the rhetoric and fanfare around the introduction of such a policy rarely changes the day-to-day operational practices or decision-making processes within the organization. Organizations very often prioritize CSR activity low down the agenda because of a belief that such initiatives are a waste of valuable capital resource that negates the more important interests of shareholders. However, research demonstrates that markets and society respond positively to those organizations that partake in socially responsible programs, and this in turn delivers benefits that cannot be converted into a simple business case. The creation of goodwill, reputational kudos, and employee engagement offers an intrinsic benefit that is difficult for the bean counters to capture.
Opportunities for a Progressive Agenda
The progress of CSR isn’t all doom and gloom. There are some very successful organizations that are creating growth opportunities by ensuring that CSR and sustainability are at the center of their strategy and day-to-day operations. For those organizations that have embraced CSR as a way of doing business and overcome the negative attitudes to doing good in the wider context, business leaders have demonstrated that a focus on doing good can succeed and contribute to growth and competitive advantage. Though many organizations may make the changes initially by reading the signs in regard to where future regulation will come, others have been more proactive in seeking opportunities to creatively adapt their business-as-usual approach to one that goes beyond possible sanctions and regulation.
Organizations that adopt a more positive approach than merely adapting old practices to avoid regulation or consumer backlash have discovered that a new sustainable approach breeds innovation and creativity that is good not only for solving immediate problems but also for developing ideas that are critical to the future of the organization. Rather than seeing the complex problems that exist in the world as something that is someone else’s problem, forward-thinking organizations have understood that the environmental agenda, poverty, and social problems that exist are opportunities not only for the organization to make a positive contribution but also for the organization to succeed in doing things differently.
Traditionally the focus of CSR has been on dialogue and participation in activities that placate objections to the operation of business as usual. There are some organizations that have gone further and demonstrated leadership in regard to sustainability and responsibility, but these are the minority rather than the majority. For some CEOs there has been a realization that there is a need to do business differently, that it is not acceptable to pursue a purely profit-based agenda, and that long-term sustainability will be possible only if immediate action is taken in regard to responsibility to the wider society and the environment. For some, the realization that the organization needs to concern itself with longer term solution is still within the realms of guarding future profits, but for others, the idea that responsibility truly does extend beyond the boundaries of the organization has resulted in actions beyond purely a profit motive. What does this tell us? That organizations do have the capacity for doing good and still deliver a profitable return, which means that an organization can continue to operate, deliver shareholder return, and take responsibility for its actions—not because it is forced to, but because it follows a deeper moral code and concern for humanity. It also demonstrates that the market can deliver something other than a capitalist agenda and deliver it successfully. Temperatism isn’t just some utopian dream that has no evidence or hope of ever being more than the dreams of tree-hugging lefty hippies. Not only does the capacity for doing good exist and is in operation, but pursuing a different agenda, an agenda for doing good, is profitable.
Holding organizations to account for their actions should not be dismissed as impossible because of the wider failure of CSR to control the agenda, especially in regard to the promotion of inclusion and equality. History demonstrates that reasserting social parameters upon the political and economic landscape is possible, not merely in the form of greater regulation, but in a rebalancing of power relations. In truth the CSR agenda’s failure to change the culture of capitalism in the boardrooms develops the argument for a Temperatist economic, political, and social model. Capitalism has been given the chance to voluntarily change, to make good on their promises to be accountable and responsible in their business dealings, has been found wanting. What CSR has provided is a platform from which Temperatism can make its clarion call. Demanding that social and human rights and good stewardship of the environment become the central agenda of organizations is less radical than it was 40 years ago when consumer and pressure group activism began.
Temperatism extends the definition of CSR by challenging the norms of capitalist corporate behavior, from mere social responsibility to that of citizenship, and inverts the Hierarchy of Corporate Responsibility so the nice-to-haves become must-haves. Doing good implies not only environmental and social duties but also a redefining of economic rights beyond simple waste elimination and responsible management practices. Temperatism extends the boundaries of responsibility beyond the organizational walls and demands that organizations devote their operations to a more worthy cause than simply greater levels of profit. Furthermore, Temperatism develops a moral discourse within organizations as to their duty to humanity in relation to the actions that they take. There is an expectation that organizations will act in the interests of the wider context, protecting human rights beyond legal duties and sometimes sacrificing greater levels of short-term profit to find the balance between long-term wealth creation and doing good.
While preventable poverty, disease, and inequality exist, there is a moral obligation for organizations to develop robust codes of conduct beyond mere target setting, to develop guidelines regarding choices that reflect corporate responsibility in a Temperatist setting. Not only should employees be treated with respect to the valuable resource that they are, with benefits and remuneration to reflect it, but organizations must also set themselves a new challenge regarding their responsibilities to society as a whole. While it is right that organizations are profitable in order to continue trading, Temperatism suggests that there is a higher level of rightness, which should ensure that organizations use their position in society to use the wealth created for the betterment of humanity. It is easy to highlight the failings of organizations based on examples of corporate wrongdoing and excess and bemoan the lack of responsibility taken. But just as there are examples of bad organizations, there are many that demonstrate the significant impact an organization can make to society and the environment by choosing to take responsibility. The new thinking Temperatism advocates isn’t based upon a belief that organizations are evil; instead it celebrates the unique position that organizations have in our society and suggests that they are the mechanism by which doing good can be achieved.