Corporate social responsibility and societal governance

By Jeremy Moon

 3 min read ◦

Russia’s invasion of the Ukraine reminds us that corporate social responsibility (CSR) is both a reflection of the times we live in and also dynamic! Numerous corporations, acting in response to social and political pressure, are withdrawing from Russia on the grounds that human rights, and a nation’s rights, are being trampled on. This is not to say that these decisions necessarily come easily: there may be ethical, strategic, stakeholder and political tensions. But the point is that perhaps the most basic societal issue of war and peace – and its governance – enters CSR agendas. Ethical investors are even considering the defense industries as suitable for their assets.

In recent decades several challenges have emerged which appear to move CSR from a relative comfort zone of discretionary activities to more core societal governance challenges, some of these manifestly involve some corporate culpability (e.g. the 2008 financial crisis, international supply chain labor abuses, climate change, ecological degradation), others like international pandemics, war and international health and welfare challenges reflected in the UN Sustainable Development Goals, may reflect wider causes. Nonetheless, corporations claim some responsibility for these issues. Even corporate ‘talk’, as well as ‘walk’, contribute to the redefinition of CSR to take in core societal governance challenges.

This is understood as right and proper from some perspectives. Medieval corporations were established precisely to achieve public ends – often of basic infrastructure. Industrial corporations were pioneers of C19th health, welfare and education systems.  In many developing countries corporations take responsibility for physical security of their employees and communities. 

But in the late C20th a view took hold that this was somehow inappropriate.  Milton Friedman’s famous 1970 critique of CSR was precisely on the grounds that corporations are not accountable for addressing such issues: governments are. Many CSR advocates, whether fearing a corporate takeover of government or vice versa, and have advocated a dichotomy between the responsibilities (social and economic) of corporations and those of governments.

Yet the last twenty years have witnessed two related phenomena which challenge the dichotomous view. First, corporations have chosen to engage in social and environmental agendas which are core for national and international governments (e.g. human rights, corruption, access to resources), whether in response to pressure or by virtue of their own ethical or strategic judgement. Secondly, governments have encouraged corporations to enjoin public efforts, through their policies of endorsement and cajoling, financial incentives, partnerships and even mandates (e.g. for energy markets, non-financial reporting, supply chain due diligence).  

Governments have recognized the distinctive resources that corporations can bring to governance questions (e.g. to innovate, to experiment, to reach beyond national boundaries, to collaborate). Interestingly in cases of mandate, governments often cede to corporations discretion as to how, rather than whether, to comply. Thus, for example, corporations can choose whether to cynically comply with international weapons sanctions on a country to sell arms by the legal use of third parties to effectively maintain the sales OR to embrace the spirit and intention of the sanctions and uniformly cease the sales to the regime in question.

But Friedman’s critique nags and critics of corporations point to unaccountable corporate power through lobbying and informal influence.  Corporations lack a traditional democratic mandate. We elect MPs and governments, but not CEOs. So is engagement with public policy (rather than legal compliance) really the business of corporations?  

My short answer is ‘yes’ on the grounds that businesses are members of society and that corporations are afforded particular privileges by the state, and thus have clear public duties. But the situation is not satisfactory.  In most democratic jurisdictions corporations’ roles ‘to make’ and ‘to take’ regulation are not clearly specified and thus their accountability is unclear.  Moreover, new international multi-stakeholder initiatives which tie corporations in with each other and with civil society often fail to effectively regulate errant organizations.  

So we have a challenge which is about CSR and politics: how to better build corporations into political institutions? I suggest that the challenge is shared – for corporations to review their political participation to ensure that it is citizenly; for civil society to engage in defining how corporations can be more accountable and to engage more directly in corporate accountability (perhaps with support from government?); and for governments to review how accountably corporations influence and respond to regulation.  

About the Author

Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

Photo credit: TarikVision on iStock

Are we asking the wrong questions in corporate social responsibility (CSR) research?

By Rikke Rønholt Albertsen

 3 min read ◦

The sustainability contributions of business are under increased scrutiny in society. Observations of greenwashing, blue-washing, corporate hypocrisy, and decoupling suggest the existence of an intentional or unintentional gap between espoused CSR strategies and actual sustainability outcomes at the societal level. In other words, there seems to be more “talking” than “walking”.

This has inspired a growing concern in parts of the CSR research community that maybe we have been asking the wrong questions. Is it possible that in some ways we are contributing to this gap between strategy and impact?

Next year, an entire subtheme of the annual European Group for Organisational Studies (EGOS) conference will be dedicated to “Rethinking the Impact and Performance Implications of CSR”. This subtheme will address the tendency in CSR research to focus on outcomes at the organisational level without analysing impacts at the societal level.

There are valid reasons for limiting the scope of CSR research in this way: from an organisational performance perspective, many of the traditional success criteria for CSR policies—such as strengthening legitimacy, market position, and employee satisfaction—do not require data to be gathered on sustainability impact from a societal perspective.

However, the urgency and magnitude of the current global crisis related to climate, biodiversity, and social inequality fuels the expectation that corporations should acknowledge their role in creating these crises and take decisive action to be part of the solution. From this perspective, one would expect CSR research to provide knowledge of how, when, and why CSR policies and practices truly contribute to solving sustainability challenges. Yet, as a review of current CSR literature shows, this is rarely the case [1].

So what constrains CSR researchers from addressing this impact gap? In the following, I will highlight two interrelated mechanisms that have emerged from my research.

1) Sustainability impact is non-linear, systemic, and complex.

The problem with measuring sustainability impact is that it does not conform to conventional systems of measurement and reporting. Company CSR reports primarily provide key performance indicators linked to resource use per unit of production or list company policies and protocols to ensure compliance with various sustainability standards. In general, companies tend to (self) report on the successful implementation of their (self-imposed) CSR strategy, which happens to align with existing business objectives. However, as dryly noted by former environmental minister and EU commissioner Connie Hedegaard: the need for CO2 reductions is not relative; it is absolute! The melting Arctic poles do not really care that a company has made an effort to reduce its relative emissions if the net result is still more CO2 [2].

The negative impact on ecosystems is subject to irreversible tipping points where effects compound and accelerate. Thus, the societal impact of a sustainability policy or protocol cannot merely be assessed at the organizational level. It must be traced up and down the value chain and checked for unintended systemic consequences and hidden noncompliance [3]. Think of ineffective emission off-set schemes or families impoverished by bans on child labour. Ultimately, being “less bad” does not necessarily amount to being good.

2) Researchers do not have the necessary information.

Analysing the societal impact of corporate CSR policies and practices is a highly resource intensive task, which requires an entirely different set of research skills and data access than traditional organisational research. Instead, researchers most often opt to evaluate sustainability performance through estimations, perceptions, and narratives offered by company staff in surveys and interviews [1]. This data is context specific and prone to subjective biases, making it difficult to draw objective conclusions about societal impact.

Consequently, because there is so little existing knowledge of the link between CSR initiatives and societal impact, the CSR contribution of corporations is primarily assessed based on compliance with reporting standards and commercial rating initiatives such as the Dow Jones Sustainability Index [4]. This, for lack of better options, becomes the go-to objective indicator of CSR performance used by CSR researchers. Through this self-fulfilling circular logic, these indicators are used to identify CSR high performers for research on best practice. CSR research thus potentially perpetuates the perception of what successful CSR policies and practices look like—all without examining the societal impact of these practices.

Is this a problem?

Just as corporations increasingly realise that addressing CSR issues is no longer optional, we as CSR researchers may need to move beyond asking how, when, and why corporations engage with sustainability and begin asking how, when, and why corporations contribute to sustainability. If we do not, we risk losing our relevance when corporations look to academia for guidance on how to design and implement CSR strategies based on maximum impact rather than just maximum compliance and minimal risk.

We are challenged to expand our field of enquiry and be innovative when assessing how the observed means ultimately align with desired ends. This will require forging research alliances with new knowledge fields and establishing relationships with new groups of informants beyond company employees. The first step, however, is to rethink the questions we ask.

Further reading

[1] J.-P. Imbrogiano, “Contingency in Business Sustainability Research and in the Sustainability Service Industry: A Problematization and Research Agenda,” Organization & Environment.

[2] C. Hedegaard, “Farvel til ‘logofasen’ -nu har vi set nok grønne slides,” Berlingske, 2020. [Online].

[3] F. Wijen, “Means Versus Ends In Opaque Institutional Fields: Trading Off Compliance And Achievement In Sustainability Standard Adoption,” The Academy of Management review.

[4] M. Zimek and R. J. Baumgartner, “Corporate sustainability activities and sustainability performance of first and second order,” 18th European Roundtable on Sustainable Consumption and Production Conference (ERSCP 2017).

About the Author

Rikke Rønholt Albertsen is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School and a member of the multidisciplinary CBS Sustainability Centre. Her research focus is on exploring and understanding gaps between the espoused sustainability objectives of corporations, and their actual contribution to sustainability. She has a background in consulting at Implement Consulting Group and in sustainability advocacy as co-founder of Global goals World Cup

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Photo by Emily Morter on Unsplash