CSR & Government – Updated

In my previous post, I discussed about the possibility for the market economy to self-regulate and extract virtue out of companies, as well as the need for governments to internalise the positive externalities of CSR. I then found another article which provides a setting for the discussion (which should actually be read first in order to appreciate the contents of the previous post!).

Looking at this “Encyclopedia for Business”, it includes a section on the arguements for and against CSR.


Carroll and Buchholtz, 2003

This section notes that the “economic” argument against CSR is perhaps most closely associated with the American economist Milton Friedman, who has argued that the primary responsibility of business is to make a profit for its owners, albeit while complying with the law. According to this view, the self-interested actions of millions of participants in free markets will, from a utilitarian perspective, lead to positive outcomes for society.” Nevertheless, there is “little market for virtue” as discussed in a seminar session extracted from my previous post.

In the ‘competitive’ argument of against CSR, the article states that businesses could hurt their competitive position relative to other businesses when they internalise the costs of socially responsible actions.However, CSR actions that support government regulations could be doing so in order to tilt the playing field towards things that would benefit them, as highlighted in my previous post. This view of “self interest” could result in a net social benefit, akin to to the long-term perspective presented in the section that “corporations should conduct themselves in such a way in the present as to assure themselves of a favorable operating environment in the future”.

One interesting arguments against CSR is that “those in business are ill-equipped to address social problems”. In fact, “part of the capability argument also suggests that corporations can best serve societal interests by sticking to what they do best, which is providing quality goods and services and selling them at an affordable price to people who desire them.” This view suggests that corporate involvement in social issues may actually make the situation worse.However, I feel that it it is only so because CSR is viewed as something additional or separate to a company’s business workings. On the contrary, I find that this statement fully encompasses the idea of CSR when CSR actions are viewed as being integrated into an organisation’s philosophy and strategy.

This exhibit was prepared in 2003, yet it remains relevant till today. The debate on CSR continues on and while much progress have been made to date, there are still skeptics of CSR. Recent scandals by BP (oil spill from deepwater drilling project) and Apple (Foxconn suicides) have led to a wave of doubts on CSR practices by companies. Nevertheless, there are companies that have successfully integrated CSR efforts into their business model, as well as domestic and international efforts by countries worldwide to participate in CSR initiatives like the UN Global Compact. While some issues such as accountability and reporting still persist, I remain optimistic that we are geared for more responsible actions by companies and governments alike with increased awareness through numerous CSR efforts.

References:

http://xyd.posterous.com/the-role-of-governments-in-csr#more
http://www.referenceforbusiness.com/management/Comp-De/Corporate-Social-Respo…
http://www.brookings.edu/comm/events/20051102.pdf

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