Capitalism and CSR

I just read an interesting paper by Wayne Visser. He criticizes what he believes is the failure of CSR, or what he names as CSR 1.0 as it current is being practiced. He makes the comparison between CSR and the developments within the internet moving from Web 1.0 to Web 2.0. He believes that there should be five guiding principles for a new form of CSR namely: Creativity (Sustainable Business innovation), Scalability (The ability to transfer individual experience into a systematic approach), Responsiveness (meeting the needs of the community), Glocality (a rewrite of being global but acting local) and Circularity (A cradle to cradle approach)  

His article looks into some of the key areas of CSR and comes up with a DNA model for responsible business. His key point is that companies of the future that practices CSR, or CSR 2.0 as he put it, will have to include four basic “codes” into all aspects of their business. These building blocks are Value Creation, Good Governance, Societal Contribution and Environmental Integrity.

I must admit I like the approach that Visser present. Especially one point, which he includes and I think that many CSR professionals tend to miss in their argumentation, is that companies have to make a profit in order to be able to contribute the society. While Visser thinks that “our modern capitalist system is faulty at its core” and points out that it is basically a limitless system dedicated to endless consumption of our global resources. He argues that Adam Smith and his “invisible hand” were wrong and that the resource consumption of capitalism should somehow be controlled. His basic argument is that nothing lasts forever and if business continues to exploit the resources of the earth we will all suffer.

As a firm believer in both CSR and in Capitalism (faulty as they both seem to be) I have to say a few words on behalf of our current economic system.

First, capitalism is not the perfect system assuming that one’s goal is that we should have a perfect harmonious world. Actually it has disharmony as one of its central points as markets strive in the vortex between demand from those who want and the ability of business to produce in order to meet that want.

When business operates it will always try to produce at the lowest cost possible at the right quality in a timely manner. This is because we as consumers wants to buy quality at the cheapest price available and that the owners wants as much out of their investment as possible. In a globalised world we are able to produce our products in one end of the world and sell on the local market in another, at a fraction of the price it would take produce the same thing locally.

In theory all should be happy, we as consumers (because we can afford the product), workers in the developing world (because they have jobs), Society (because we all pay tax and contribute to local community) and the environment (as we disperse a possible impact).

However, we are not as happy as we could be. Because consumers lose their jobs when their place of work is moved, as the working conditions in the developing world is far from what we have come to expect, as corruption and tax schemes tend to eat up all the potential benefits that having big business do investments should come with and because there is no effective local government to enforce en environment standards. And of cause because there are evil people who are willing to make others suffer in-order to make a buck.

But as flawed as it might be it seems to be the only system that we as humans are able to make work.

Secondly, Because of these tensions in the capitalist system and the access to information that have become available through the web about the impact of global business we have invented CSR. Or rather business has invented CSR, as it is not a system that governments have promoted, actually quite to the contrary actually. Think of strategic philanthropy and how giving company products to schoolchildren. Think about the controversy this raised among the public. So, why should capitalist endorse CSR? Well they already do because they want what every business desire namely growth, prosperity and market share, and in order to do so they need to manage risk, reduces costs, be ethical, retain and attract employees, manage their stakeholder relationships, have a positive brand, innovate and learn, and not least understand their business even better than it does today.

In this context is CSR a tool that business can use to be ahead in the future. Visser claims that business thinks short term, but I do not think that this is necessarily true. What I do think is that shareholders (e.g. us, through pension funds, bank connections, unions etc.) think short term and “we” pressure companies to do the same.

Third, should we leave the market alone? No of cause not, we need to manage capitalism and we need to have some form of business control and transparency. There are plenty examples that evil and corrupt people can do real harm to the world. Just think of Enron, Lehman brothers, Arthur Andersen, etc. and one can easily se that no control is REALLY a bad thing. So systems of control need to be put in place so that the biggest impacts of global capitalism can be mediated. These systems are being formulated as hyper norms or institutionalized norms through organizations like the OECD, UN, EU etc. where politicians and professionals alike find out and not least learn how capitalism can be gently pushed in the right direction for all of us.

One last note for you to think about as one put more and more on the shoulders of companies around the world. We shouldn’t leave it to business to solve the problems that governments can’t seem to agree to solve themselves. COP 15 and for that matter COP16 showed that politicians are unable and to a large extend unwilling to solve the issues that we are all becoming victims of.


One thought on “Capitalism and CSR

  1. Pingback: Rethinking Capitalism « @Vise Business Blog

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