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Putting a friendly face on capitalism

  • Article by: ERIC WIEFFERING
  • Star Tribune
  • July 1, 2011 - 3:36 PM

In case you missed it, big business wants you to know it cares.

How you could have possibly missed this, I don't know, given the massive efforts companies now undertake to convince us that they are faithful practitioners of Corporate Social Responsibility (CSR) -- a movement that says companies must do more than make a profit. They must make the world a better place.

But maybe we would all be better off if businesses spent less time trying to market their virtue, and more time focusing on their long-term bottom line.

Daniel Altman, a noted international development economist and consultant to major corporations, makes a similar argument in a paper published last month that set off a mini tremor in corporate and nonprofit philanthropic circles.

Altman suggests society is far better served by companies that focus on their own long-term sustainability, instead of the imprecise and unfocused do-good impulse that now characterizes many CSR initiatives.

"Executives targeting profitability with a sufficiently long time horizon will make investments that generate social benefits because these investments serve the interests of their companies," say Altman and his co-author, Jonathan Berman, a partner at the consulting firm Dalberg Global Development Partners.

Altman is not arguing that companies should ditch all CSR efforts. Instead, he thinks they should subject them to a far more rigorous analysis that integrates them with business objectives.

"In many cases, initiatives labeled as CSR operate outside companies' core lines of business and have fuzzy objectives intended to satisfy several different constituencies," he said via e-mail. "Under these conditions, execution suffers; companies often accept lower standards for success in their CSR efforts than in their core business."

At the same time, though, the title of Altman's paper, "The Single Bottom Line," strikes me as a pointed and much-needed jab at some of the imprecise and soft standards companies have adopted to demonstrate their good citizenship, such as triple bottom line (people, planet, profit), or CSV (creating shared value).

Charity is nothing new to corporate America. Minnesota has been especially blessed by the presence of many corporate foundations that have given generously and, until recently, quietly.

What made CSR different, at least initially, was the effort to inject a moral component into a business's operational and strategic decisionmaking processes. Suddenly, companies found themselves being rated on everything from the size of their carbon footprint to whether they provide benefits to same-sex partners of employees.

With surveys showing that consumers prefer brands that are associated with good causes, it's hardly surprising that corporate marketing departments are now engaged in a virtuous arms race. The breast cancer advocacy group, Susan G. Komen for the Cure, reported having 240 corporate sponsors last year, and U.S. corporations spent an estimated $1.6 billion on cause sponsorship programs.

Today, most publicly held companies feature a CSR tab or drop-down on their company websites. They also spit out annual CSR reports that rival, in size, their annual reports to shareholders. Xcel Energy's CSR report, for example, comes in at 115 pages.

For me, the fundamental flaw of CSR is that it overlooks one of the basic points of capitalism: The profit motive will drive companies to do things that ultimately benefit society. In fact, the most interesting CSR reports show how efficiently that process works.

General Mills, for example, saved 10 million gallons of fuel in one year after introducing a new computerized transportation system to schedule and select the best way to ship products from manufacturing plants to distribution centers.

This would have happened even if the CSR movement did not exist; CSR is just another vehicle for telling that story.

The problem with many of these CSR reports, though, is that they've become a catch-all marketing umbrella, a way to tell stories lacking much substance or to trumpet programs of questionable value, either to society or to shareholders.

That's why if you ask 10 people what CSR means, you're likely to get 10 different answers. Behave ethically. Treat employees well. Be green.

Google famously put it as, "Don't be evil." But that didn't stop the company from agreeing to government-imposed censorship restrictions before going into China.

These days, just about any company can and does claim to be socially responsible. Corporate Responsibility Magazine's annual ranking of 100 best corporate citizens includes mining firms, oil companies and, at No. 35, Altria Group Inc., a company that makes and sells an addictive product that kills people.

That most tobacco companies can and do call themselves socially responsible perhaps best illustrates what happens when a well-meaning notion like CSR ends up in the hands of marketers, consultants and corporate image makers.

Claims become suspect, genuine accomplishments are diminished and meaning is lost.

ericw@startribune.com • 612-673-1736

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