The Evolution and the Future of Corporate Social Responsibility in a Post Covid-19 World
May 6, 2020, 11:47 am
By Sophie Corcut, Freelance Consultant
As we contemplate what the ‘new normal’ means for individuals, governments and societies, it seems a timely moment to reflect on the role and scope of ‘corporate social responsibility’ (CSR). In the wake of Covid-19, we look back at the evolution of CSR and ask what it could mean in a post-pandemic world?
Corporate social responsibility, known as ‘CSR’, was the private sector’s response to a debate about the scope of business responsibility for the social and environmental consequences of commerce. It was the twentieth century incarnation of an age-old concept; that business is often moved to give something back to their workers and communities who dedicated lifetimes of hard graft, through private forms of wealth redistribution. One famous nineteenth century philanthropist was the entrepreneur Andrew Carnegie, who donated Carnegie Hall to the city of New York. The formal practice of CSR emerged in the 1960s, against the backdrop of a rapid globalisation and industrialisation of trade and commerce, particularly as companies’ practices and activities were moved offshore and away from the public eye and became harder to scrutinise. In the 1990s the public watched as Nike’s reputation (and stock price) plummeted in the wake of the exposure of its unethical labour practices in sweatshops in Asia. Others rallied to avoid similar damage by implementing CSR strategies and teams. In-house experts dedicated themselves to managing brands’ reputations and any negative press brought about from public criticism.
At this time, CSR was primarily about companies developing a case for enhancements that could support the ‘three Ps’; positive social and environmental impact (people and planet), whilst at the same time benefitting the bottom line (profit). For a business strategy competing on price, CSR could be leveraged to drive resource efficiencies – installing long-lasting LED light bulbs or reducing waste to slim down the costs of production. If the business strategy was focused on competing in a premium market, brands might buy from more sustainable, certified producers and suppliers to provide higher quality products and services. It was also used as a defensive measure to reduce the cost of complying with government regulation – for many businesses ‘getting ahead’ of the regulatory curve was one way of spreading the costs of operational investment (in legal worker standards and benefits, cleaner factories etc.) and any penalties incurred from falling behind. Either way, CSR needed to support a business case, and the business case needed to support competitiveness, differentiation and profitability. In turn, CSR teams could produce positive stories that might build on the long-term positive reputation of the company.
However, the debate has continued to revolve around ‘how far CSR needs to go’, and the degree or share of responsibility each actor in society needs to take. The debate developed significantly in 1987, when the term ‘sustainable development’ was taking shape with teams at the United Nations advocating for a more long-term and holistic approach to safeguard the planet and ‘our common future’. For the first time, the global consensus touched on all the interconnected issues relating to society and the environment, from protecting ocean health to gender equality and equitable economic development for all citizens. It was agreed that global development driven predominantly by the private sector (regulated by the public sector), needed to be managed carefully in order to ensure everyone living today and future generations had access to the benefits of economic growth. As the consequences of human activity on the environment and the climate have continued to come to light (the 2018 IPCC report forecasting the impacts of average temperatures warming to 2 degree celsius on average), discussions about the pressures that face businesses have shifted from being primarily about reputation management to being more fundamental to the business model; existential, even. As many scientific studies have revealed, the ecosystem services that sustain all economic activity are now reaching breaking point and will soon be unable to replenish and sustain today’s fast-paced way of operating. It began to seem realistic that CSR may not optional, but critical to the long-term survival of the private sector.
The UN consensus of 1987 also drew attention to the interconnectedness of economic and natural systems, demonstrating the need for a more holistic approach to business. In the decades that followed, activities such as transparency, reporting, risk, corporate ‘purpose’ and the sustainable development goals (SDGs) stretched the concept of CSR even further. Whilst some businesses still focused on traditional philanthropy to ‘balance out’ the negative results of their activities through donations, others started exploring ways to embed the sustainable development agenda into their business models and to unlock growth opportunities that create ‘long term shared value’ for all shareholders and stakeholders (one key stakeholder being the ecosystem services required by a company to produce their goods and services). Paul Polman’s ambitious strategy to decouple Unilever’s business growth from its social and environmental footprint in the early 2010s was one such cutting-edge case study, particularly for a business of its scale. Polman talks often of the acquisition of ‘good’ brand Ben & Jerry’s in providing a starting point for bringing social purpose to the wider business. Today it is often the smaller businesses, known as the ‘challenger’ brands, providing the inspiration for the larger scale companies’ CSR strategies.
So where are we now? Covid-19 is forcing some specific aspects of the broader corporate responsibility discussion. These include business ‘resilience’, social security, social equality and the question of the externalised environmental costs created by businesses – ocean pollution, for instance. The ‘good’ and the ‘bad’ consequences of business activity have been highlighted in new ways: supermarket workers have become ‘heroes’ whilst those affected by industrial pollution are seeing their health improve from the shutdown of industrial activity. One of the core sustainable development challenges pushed to the forefront of the discussion is the issue of inequality, which both fuels and perpetuates unsustainable modes of production. Where climate change had already been impacting vulnerable groups such as smallholder farmers whose yields have been dwindling due to harsher summers and changing micro-climates, Covid-19 is the first of ‘nature’s’ crises to have affected absolutely everyone, irrespective of wealth, in one way or another. Covid-19 highlighted the incredible ripple-effect damage that a single knock to a complex, interconnected human system can do, and who has the resource and influence to do something about it. It has truly demonstrated the need for a structural transformation towards sustainability and the ‘resilience’ that many have started referring to.
It seems that we have reached the moment where CSR no longer seems optional. For established corporations, long-term survival in a changing environment becomes a business case in itself. Achieving long-term survival will require doing things in a way that brings about the most benefit to as many as possible, whilst reducing exposure to climate risk. Roadmaps will need to be put in place to secure organisational transformations towards achieving sustainable levels of operating, including net zero emissions, sustainable modes of production, zero waste and greater stakeholder participation. As the world went into shutdown, global growth contracted; everywhere the GDP ‘pie’ shrunk. Overnight, the traditional demarcations of responsibility: business being responsible for providing products and services; governments responsible for healthcare, were all blurred. It didn’t matter what had been expected before or who was to blame for events. It was collectively understood that, as members of a species undergoing a crisis everyone had to respond however they could. Businesses and communities pulled out the stops to supply additional kit for hospitals, blue collar ‘workers’ became ‘key’, putting their lives on the line to provide food and transportation for doctors and nurses. The traditional demarcations of responsibility were thrown up in the air. We all reconnected with those most fundamental of human values: resourcefulness, creativity and compassion. We remembered that values are all that are left when economic systems shut down and business cases become redundant. Covid-19 will place even greater emphasis on the role of bodies with the capital, resource, talent and influence to invest in sustainable development, which aims to protect society against future shocks to the system.