Why CSR projects fail to leave lasting footprints

Opinion and Analysis

US President Barack Obama and First Lady Michelle who toured Africa together last year. Obama is hosting more than 40 African leaders in Washington this week. PHOTO/AFP 

By APURVA SANGHI

In Summary

• Most companies do what makes them feel good instead of really making an impact like removing barriers to competition to create more jobs.

The modern era of corporate social responsibility began in 1953 when Howard Bowen published his seminal book Social Responsibilities of the Businessman.

He questioned “what responsibilities to society may businessmen reasonably be expected to assume.’’

Since then CSR has evolved into a term that embraces a range of activities from the superficial, irrelevant, to ones that are changing the way in which business interacts with the society .

CSR is about companies giving back, especially when they are perceived to be prospering at the expense of the broader community. So examples range from oil giants’ support to education to fast food chains’ support to health-related concerns.

Guilt complex

Call it the ‘guilt complex’—charity as means of managing a potential backlash against business.

But one may ask: How can companies that produce products that are polluting the environment have a strong reputation for social and environmental responsibility?

To which one CSR advocate answered: “Because it’s not about their products, it’s about the company behind the products.”

But this very response demonstrates what is so broken about the CSR model as it is often practised; charitable endeavours undertaken by a firm that have little to do with its core product or business practices.

This reduces such endeavours to orphan initiatives that leave no lasting effect—like the feel good act of painting the community school and then walking back into a corporate culture that does not mirror these efforts (let alone depriving the for-profit local painter of employment). 

NGOs and watchdog groups argue that businesses aren’t doing enough, and whatever they do is too superficial.

So business can never compensate for the great ills that it commits, finding itself caught in a vicious circle, responding to criticism in a way that only angers its critics further.

And these criticisms don’t only come from those whose primary —or overt —concern is with society or the environment. CSR is criticised by free market thinkers too.

Nobel laureate Milton Friedman railed against CSR as a case of “the corporate exec­utive … spending someone else’s money for a general social interest.

In his best-selling book, Capitalism and Freedom, Mr Friedman argued that “there is one and only one social responsibility of business—to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”

In other words, the business of business is business. And this is a good thing.

While to some, capitalism is invoked as a dirty word, to others it is seen instead as an unparalleled means by which to meet human needs, driving efficiency gains, pushing the boundaries of discovery and innovation, creating jobs, and building prosperity.

Business acting as business, and not a charity, is among the most powerful forces mankind has to wield in addressing the complex pressures that we face on this planet. 

Take as an example this scenario: A sick child is in rural Kenya, with limited road coverage and no easy access to medical services. Using a mobile phone, her mother contacts a health care centre which undertakes an initial diagnostic.

This can be a simple, but useful discussion about the symptoms, but may also extend to the use mobile based diagnostic tools. The initial diagnostic requires a small upfront fee, which is paid using mobile money.

Now, the illness unfortunately requires the child to get to the clinic for actual treatment, so the mother calls a boda boda driver to pick up her daughter.

The boda boda guy rushes on a bike made in China or India— and soon Kenya—available now cheaper than ever before, weaving through village paths that are not accessible to normal cars.

The child gets to the clinic and is thankfully attended to. All of this occurs through the provision of goods and services by private, profit maximising firms and individuals, from the mobile operators who provide voice and money transfer services, to the bike manufacturer, to the boda boda entrepreneur. Perhaps even a private health care provider.

It requires systems by which multiple industries and firms must be connected together to enable this chain of interdependent transactions to happen.

This is complex stuff, but once triggered and connected, the solution is in place and scalable to all Kenyans.

The value lies in maximising the connected effect through collaboration and alignment of interests, which then leads to cascading downstream benefits to other businesses and society at large.

Lest this sound too rosy, there is one point to underscore in Mr Friedman’s quote— this is only desirable as long as companies stay within the rules of the game such as abiding by rules that promote free and fair competition.

So you can have a corporation that happily trumpets its good corporate citizenship while resisting the removal of barriers to competition which would likely lead to greater consumer welfare.

One may also wonder whether Bill Gates’ grand global giving initiatives can really compensate for his supposed monopolistic practices when at the helm of Microsoft

Insofar as his actions in accord with his ‘social responsi­bility’ reduce returns to stockholders, he is spending their money.”