Goodbye to CSR, welcome to Social Commitment

 social commitment: picture of three hands holding a green world

What made Body Shop special was a long-term company focus on a social commitment in business 

Its charismatic founder Anita Roddick wanted to make a difference to how animals were treated. That is, not used for social commitment@ picture of Anita Roddick holding a protest poster testing cosmetics. The firm’s reluctant owner L’Oréal got tired of poor sales, and has sold it to a Brazilian company.

The recent sale of Body Shop serves to remind us of Roddick’s legacy. Her strong social mission created a commercial winner. For a while she led the way in companies going beyond the more narrow view of Corporate Social Responsibility (CSR).

As widely practised, CSR seldom involves a genuine social commitment in business. Instead, it is mainly project based and only a part of a company may be involved.  CSR motives can be highly self-serving. They are usually tailored to give the company the maximum payoff in terms of publicity and image.

For example, in India the director of a well known non-government agency specialising in girls education received a call from a company. The firm asked if their employees could “visit the girls for 30 minutes” in their homes in an upper middle class residential area of West Delhi. When the Director asked the company why they wanted their employees to visit and what they would be doing, the only explanation was that it fulfilled their CSR quota .

Similarly, theater directors who work with disenfranchised communities have received calls from multi national companies asking if they could include them in their CSR campaigns, but without expressing compassion or any genuine interest in their artistic practice.

In searching for respectability, companies around the world have spent millions on CSR. They have donated products to support people in need, invested in clean technology to lower their environmental footprint and done other equally positive projects.

social commitment in business: shows 3 letters of C-S-RIs CSR bad for business?

But basically CSR has failed. Only about a third of consumers across the 15 largest economies say companies are good corporate citizens. Even the ones who spend millions each year on CSR do not get much of a bang for their buck. Some 4% of consumers say they are absolutely not to be trusted as good corporate citizens and 60% are not sure.

Neither has CSR done much to make a company be seen as an appealing place to work. Some 61% of companies studied did not seem to deliver on expectations when it came to treating their employees well. One recent study for example found  CSR reduces a firm’s overall performance and investment efficiency. It concludes:

“Management should carefully evaluate the risks of CSR investing and its effects on external financing and potential performance.”
Corporate social responsibility and capital allocation efficiency
Journal of Corporate Finance Volume 43, April 2017,

Many firms that have embraced CSR have been unable to capitalise on their investment. So they do not link their CSR commitment to business strategy. Instead they treat it as a separate initiative.

This contrasts to companies that make a genuine social commitment. Some of the best examples occur outside of traditional Western firms. In India, for example, the most successful global companies build social commitment into the entire fabric of the firm. It’s an important aspect of their core purpose.

Studies on perceptions of business responsibility show consumers—including in India—are more likely to buy from companies perceived as “caring” for people, communities and social issues.

Unfortunately, many firms opt for the sort of CSR activity that “feels good.” But often this is mostly a pseudo philanthropic marketing campaign, commitment is skin deep and seldom long term.

On April 1, 2014, the new Companies Act, 2013 in India came into force. The country became the first to legally require companies to “give back” to society. Above a certain size, the law even requires firms to give a fixed percentage of their profits to some form of social commitment.

The new law seems to have stimulated more interest in social commitment, but it is too early to judge what a difference it will make to those companies who pay, and how consumers will come to see them and their reputations.

Beyond CSR

Contrast this mainly short-term approach with firms that go beyond CSR to embrace social commitment in business, or what might be called “political CSR.”

social commitment: picture of Nanhi KaliLeading the pack in India, for instance, is Mahindra and Mahindra a $19 billion global federation of companies with headquarters in Mumbai. The company’s Flagship Programme Project Nanhi Kali was set up by Anand Mahindra way back in the last century.

It supports the education of over a million underprivileged girls in ten states. They receive material support such as uniforms, bags, notebooks, shoes and socks; as well as academic support such as workbooks and study classes.

The key outcomes of this social commitment include an increase in both enrollment of girls in schools and the reduction of dropouts to less than 10%. It is not judged by the PR impact on the sponsoring firm, as happens so often with CSR.

Instead, the company’s social commitment in business is inextricably bound up with how the company sees itself as contributing to society

Or take Tata Power with its Flagship Programme: ‘Act for Mahseer’. Mahseer roughly translates as mahi – fish and sher – tiger. More simply it’s “a tiger among fish” and an endangered species.

Tata Power’s conservation initiative started in 1975 and established a breeding centre in Lonavala, a town in Pune Social Commitment: brand logo for Mahseeridistrict in the Indian State of Maharashtra. This involves eco-restoration and an eco-development project for various lakes.

The social interventions by firms like Mahindra and Tata point to a trend in which companies engage in activities normally reserved for governments.

This is especially true for multinational corporations.  Many contribute to public health, education, social security, and protection of human rights. Often they operate in countries with failed state agencies. They address social ills such as AIDS, malnutrition, homelessness, and illiteracy. Or they protect the natural environment and promote societal peace and stability.

Such social commitments go beyond the widespread understanding of corporate social responsibility (CSR). Instead, these efforts aim to meet societal expectations and upend the conventional view of what a business is about.

social commitment: picture of CEO of PepsiCo“…fundamental to how I see the world – the idea that companies don’t exist in a vacuum. We should be responsive to the needs of the world around us.”
,  Chairman and Chief Executive Officer, Pepsico

At PepsiCo CEO faced a lot of resistance. Critics told her to forget all this nutrition stuff and just focus on selling more chips and soda. But she persisted and created a community of supporters. With them she launched the Healthy Weight Foundation which did much more than a traditional CSR project. In total they removed 6.4 trillion calories from the company’s food and beverage products.

It exceeded the original pledge by more than 400% three years ahead of schedule. Performance with Purpose is now ingrained into PepsiCo culture. 

The traditional view of the responsibilities of a firm to maximise returns to shareholders still prevails mainly in the West. In contrast, many of the most successful Indian companies for example, particularly the global ones, attribute their business success to social, rather than CSR commitments.

The differences between conventional CSR and social commitment in business are still emerging into the full light of day. This table suggests some of them.

social commitment: infographic saying spot the difference between convention CSR and social commitment

Looking ahead

Globalisation has been one reason why social commitment in business now figures on many corporate agendas.  For example, staying ethical, while depending on extended supply chains pushes firms to show an interest in social concerns.

It all adds up to a simple story: “CSR is dead, long live social commitment.”

 

Sources:

Nielsen, Rogers, Is CSR Dead? Or just mismanaged? Forbes Dec 11 2012
J.Smith The Companies With the Best CSR Reputations, Forbes Dec 10 2012
R. Narrain, Dear Indian corporate: here is why you need to take social responsibility seriously, Quartz India, Jan 5 2015 
U. Majmudar et al, Mahindra & Mahindra tops CSR list in India even as companies scale up operations, Economic Times Oct 26th 2015
A. Georg Scherer et al, The New Political Role of Business in a Globalized World, originally published in the Journal of Management Studies, Vol. 48, 2011
“Leave the crown in the garage”: What I’ve learned from a decade of being PepsiCo’s CEO, Llinkedin July 31, 2017

Thanks also to Sarah Saddler, Doctoral Candidate: Department of Theatre and Performance, University of Minnesota for her contribution to this post. 

 

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