" ‘Responsible’ firms are really just stealing "
The Sunday Times 26 February 2012
The argument about Corporate Social Responsibility is not about corporate philanthropy. It’s about profit. I agree that companies have no right to give shareholders’ money to charity, unless there is a business justification for doing so. But responsibility is about understanding the wider social and economic impacts of a company and acting on them to make the company a stronger and more sustainable business for the longer term.
The article takes no account of significant academic and business research that provides reasoned evidence that companies with strong CSR programmes are generally better managed and produce better returns for shareholders than those that don’t. It takes no account of issues such as recruitment, programmes for local communities, human rights and environmental protection. Of course, reports that cough up non-material issues such as a bank’s green energy are less than helpful. Focus on the actions, not the reports.
Friedman was indeed the apostle of profit. The argument that the responsibility camp has with the common interpretation of his famous dictum ("The business of business is business") is whether we should focus exclusively on the short term, as the City, and the bonus culture, seems determined to do, or look at longer term shareholder return. After all most investors, and in particular pension funds, are in it for the long haul. Consumers are becoming more ethically aware, investors in SRI funds are now a significant part of the market.
Not all companies with CSR programmes get it right. But if we take BP as an example, when the disaster occurred at Macondo, BP moved quickly to put funds and resources in place to alleviate the distress. Compare this with Exxon, still going through the courts 23 years after the Exxon Valdez spill. If this had been a government or an insurance issue, the burden of suffering would have been far worse.
Like most other sectors of society, business is regarded with distrust. There is significant value in trying to turn this around. CSR needs to be understood in terms of profitability and efficiency, taking into account the social costs for which business is responsible, but not currently charged. Lawson stands guilty of the same charge he mounts against the Prime Minister, ‘grotesque and wilful misrepresentation’.
