CSR: Just Good Business?
By Daniel O'Connor of Integral Ventures, LLC
Another article in the recent The Economist survey on corporate social responsibility framed the CSR debate in a useful way by posing two questions concerning any act of "supposedly enlightened corporate citizenship:"
- Does it improve the company's long-term profitability?
- Does it advance the broader public good?
Having framed these questions in a helpful 2x2 matrix, The Economist was then able to direct our attention to four distinct varieties of CSR:
Good stuff, right?
Well, notice that the best of the four quadrants, from the perspective of a CSR advocate, is the one quadrant that The Economist identifies as just Good Management. As the magazine put it, "successful managers usually do both at once, of course: merely by running a profitable company, they are likely to be advancing the public good as well."
Interesting.
I find this rather revealing of The Economist's own bias toward a sort of libertarian economics in which the typical, well-managed firm is simply assumed to be enhancing social welfare even if its officers and directors are intentionally pursuing only economic profits. This is the old Invisible Hand Thesis from Adam Smith.
But my point is not to cast doubt on the thesis itself, though I believe it is only part of the story of the Invisible Hand. My point is to raise the question of why The Economist has highlighted only the win-win scenario of traditional business alongside the win-lose, lose-win, and lose-lose scenarios of CSR.
What gives?
When The Economist is compelled by its own reason to acknowledge the logical possibility of a win-win CSR strategy, it will apparently only do so by relabeling the CSR strategy as a case of Good Management. It's one of the oldest debating tactics in the book. When forced to acknowledge that your opponent is right about something, try to reframe the issue to make the audience think that you've been advocating for this same thing all along. "Sure some of your CSR strategies are good for profits and good for society. But that's just good business and as you know we've always been in favor of good business. Now let's focus in on these other CSR quadrants."
So what can we do with this framework?
For starters, we can finish the job that The Economist began by labeling the upper-left quadrant Good CSR or something similar. Then we've got a useful frame through which to evaluate specific CSR initiatives or specific corporations on the path toward greater CSR. As we quantify and qualify the two axes, identifying performance indicators, targets, and gaps for corporations, we might bring some additional rigor to our discussions of CSR.
But we can also extend this exercise by using the same framework for the whole of business theory and practice, with the quadrants representing the win-win, win-lose, lose-win, and lose-lose scenarios for any business strategy, for any corporation, for a whole industry, or even for such things as an industry regulation or the entire system of corporate accounting.
Going too far?
Well, The Economist opened the door by suggesting that good business is simultaneously good for the economy and good for society. I couldn't agree more. So the next logical step is to acknowledge that some business models are good for the economy but bad for society. It's not hard to imagine a corporation that has managed to increase its profits while simultaneously externalizing enormous social costs associated with it's products. Other business models may be good for society and bad for the economy. Such corporations may survive through government subsidy that is justified by politicians who have taken stock of the social benefits of the business. And finally, some business models must be bad for both economy and society at the same time. These businesses shouldn't be able to survive very long in the absence of political corruption.
With this we have one more way to frame what I call the Integral Value Proposition™—a powerful theory of practice for business leaders committed to creating economic and social value simultaneously.
© 2005 by Daniel J. O'Connor. All Rights Reserved.
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