CSR: a prevention measure?

I chanced upon an interview on CSR with Chip Pitts, who currently serves as president of the Bill of Rights Defense Committee and lectures on CSR and business/human rights at Stanford Law School and Oxford University. The interview explores the questions how CSR might have helped head off Wall Street’s precipitous failure or have avoided the scary economic development of the past two years.

Professor Pitts asserted that if properly implemented, “CSR indeed would have prevented the crisis”. He elaborated that “Instead of integrated decision-making that recognizes longer-term duties to the system – to society and the planet as well as for short-term profit – we saw utter neglect of those duties” and that “Instead of transparency, we saw manipulation of corporate forms and opaque financial instruments such as derivatives and credit default swaps” amongst other failures. “The crisis was not just a crisis of the financial sector”, states Pitts, “but one arising from an ill-informed and erroneous mindset that still infects businesses in general and requires correction”.

In the interview, Pitts continued to talk about CSR practices in 3 stages:

  1. Organisation
    Commitment to “integrated decision-making”, a systemic thinking that includes stakeholder engagement and sees the interrelationships between top global issues and corporate departments.
  2. Management
    Integration into the company’s vision, mission, strategy and core business is pertinent. Performance incentives must be aligned with CSR commitments and metrics, such that staff alike are evaluated in part on CSR targets and values as well as more traditional revenue and profit targets.
  3. Evaluation
    Internal audit and review mechanisms, as wlel as a variety of external review, audit and verification mechanisms.
    Example: General Electric has an audit team that ensures compliance with the letter of the corporate code of conduct. It also embeds CSR into its opertional review. Furthermore, GE participates in sustainability stock indexes like Dow Jones Sustainability Index.

His view is supported by an article by the Economist dated 4 years ago in 2005. It is interesting to note that while much have been discussed over the years, little have been demonstrated and the recent financial crisis is testimonial to that.

References:

http://www.truth-out.org/corporate-social-responsibility-wisdom-or-window-dre…
http://www.google.de/url?sa=t&source=web&cd=2&ved=0CBkQFjAB&u…

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