Global Policy Forum

The Dangers of Corporate Social Responsibility

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Economist
November 21, 2002


The "magnificent seven" ride again. But beware, they might bump into the "glass ceiling", or, worse, fall victim to "carpet-bombing syndrome". This collection of clichés, laced with breathless examples of consultancy-speak such as "triple bottom line" and "blended value", are intended to draw attention to a new study of "corporate sustainability" reporting by big firms, published on November 18th. Entitled "Trust Us", it has been co-written by a consultancy, SustainAbility, which counts such companies as Ford and Shell among its clients, and the United Nations Environment Programme. A SustainAbility consultant, Oliver Dudok van Heel, preaches that its mission is to make companies behave responsibly, "for the sake of present and future generations."

Firms are falling over themselves to compete for an ethical Oscar. For the record, this year's magnificent seven—those with the best scores for social policy and environment reports—are the Co-Op Bank, Novo Nordisk, BAA, British Telecom, Rio Tinto, Shell and BP. The glass ceiling is a coded way for the authors to say that these reports have not improved in quality since the first such survey was carried out in 2000. However, since then, the authors chastise, they have gained 45% in volume and now measure, on average, a frightening 86 pages apiece—hence the reference to carpet bombing.

The aim of sustainability reporting—to determine if a firm trades "fairly", protects the environment and so on—may be relatively new, but the tone of this report is thoroughly Victorian, a sort of schoolmasterly "could do better". And herein lies a serious concern.

Pervading the report is the sense, increasingly widespread nowadays, that companies are inherently immoral unless they demonstrate that they are the opposite—in effect, guilty until proved innocent. Yet, even allowing for some recent corporate scandals and the odd crooked chief executive, most law-abiding companies do good simply as a by-product of their pursuit of profits—as Adam Smith first proclaimed over 200 years ago. In its rush to sell clients advice on how to buff up their ethical image, SustainAbility glosses over the fact that the likes of Wal-Mart employ thousands of staff worldwide and also deliver goods cheaply to consumers.

Being loudly ethical is, claims Mr van Heel, good business (for his clients, not just his consultancy) because it cheers up investors, workers and customers. Clearly, some big companies are willing to humour him, and neglect to take issue with some of the nonsensical claims made by social activists against them.

Splashing out on a big report may keep activists off a company's back. But although sucking up to politically correct lobbyists might seem a small price to pay to keep them quiet, in reality it can reinforce the feeling that companies have a case to answer—escalating criticism, and perhaps helping to create a climate in which heavy regulation becomes politically acceptable. The danger is that those bosses who believe that these reports are basically harmless, and that the main cost of producing such door-step-sized volumes is only a few trees, may find that it turns out to be much higher.


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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.