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Financial Times: Business as usual is not the answer to society’s problems

By Craig Smith and Howard Ward

Published: October 20 2006 03:00 | Last updated: October 20 2006 03:00

Britain is a leader in the field of corporate social responsibility, home to many of its foremost thinkers, campaigners and practitioners. Yet many of these experts believe CSR is at a turning point and may be facing a quiet death.

Worldwide practices have long been shaped, in good and bad ways, by the experiences of UK companies, non-governmental organisations and governments. The exploits of the East India Company, for instance, still colour Indian attitudes to foreign investment. In contrast, the Lever soap factory at Port Sunlight, opened in 1884, was a widely emulated alternative model of industrial development.

The launch of the Body Shop in 1976 showed there were market rewards for good CSR from consumerism with a conscience. Meanwhile incidents such as the standoff between Greenpeace and Shell over the Brent Spar oil platform disposal in 1995 triggered fresh concerns about the accountability of both companies and campaign groups.

Pressure has steadily built for responsible business practices, be it in the sourcing of clothes or the provision of essential medicines. Kim Howells’ appointment in 2000 as the world’s first CSR minister seemed to herald a new era. Yet, for all its success, CSR has become a troublesome term that is actively avoided by many companies and campaigners. This is because there is little consensus on what CSR is; what its long-term outcomes should be (from “ending global poverty” or “sustainable development” to “better financial performance”); or who should do what to achieve those ends. It has become discredited among its disciples.

There are signs of a deep malaise. In companies, CSR all too often sits in the corporate ghetto of public affairs, estranged from the heart of a business. Privately, specialists within leading companies complain of slow progress because of customer apathy.

The wobble extends to government. Margaret Hodge was recently appointed as the sixth CSR minister in as many years. Governments in the UK and overseas focus on making companies realise that socially responsible business is profitable. But many campaign groups, such as the Core Coalition, want to see worthy words backed by hard laws on corporate accountability and the duties of directors.

CSR is at a crossroads. Which way it heads is partly dependent on external events: the growing importance of China and India; the implications of outsourcing workforces to middle- or low-income countries; or the global security environment. But fundamentally, its future turns on the interaction of two factors. First, what business believes it “ought” to do, which is set by both the profitability and moral acceptability of certain practices. And second, by what government says business “must” do.

Governments, in theory, prefer a “light touch”. Ideally, minimal market intervention would be coupled with a big commitment to sustainable development from business and consumers.

Such a scenario seems unlikely for now. Examples of bad practice – the Bhopal tragedy, failures of oil majors in the Niger Delta and corporate inaction on climate change – show that the pure business case is still too weak. But consumers and governments seem unwilling to do more and campaign groups acting alone cannot create more than islands of “good practice”.

Many business leaders and non-governmental organisations are looking to the government to break this double bind by offering a clear policy framework. This inevitably means more intervention and more regulation. Trade associations such as the CBI employers group should pay heed and reform their lowest common denominator approach to issues ranging from mandatory company reporting on social issues to environmental regulation. Failure to do so will invite protests from members.

Leading businesses, in turn, need to raise their voices and act. Rather than passively wait for a socially responsible business case to emerge, they need to build one which tries to address challenges such as climate change and sustainable development. CSR is a term in flux which may wither in time. But its spirit – understanding business as part of society – will survive. And we can be sure that “business as usual” will be no answer to the pressing issues of our time. CSR is dead . . . long live CSR!

Halina Ward is director of the business and sustainable development programme at the International Institute for Environment and Development. Craig Smith is senior fellow in marketing and ethics at London Business School. Their reportt “CSR at a crossroads” is at: www.iied.org

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