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How CSR transforms pursuit of profit into moral mission

Recent discussions have explored the ways Corporate Social Responsibility (CSR) might work in the interest of business. Countless academic articles have also celebrated the connection between positive…

AusMake pursued Corporate Social Responsibility in a number of technical ways that supported its economic goals. Shutterstock

Recent discussions have explored the ways Corporate Social Responsibility (CSR) might work in the interest of business. Countless academic articles have also celebrated the connection between positive social and environmental initiatives and profitability. Amongst them is the well-known strategy guru Michael Porter, who writes about the business case for “doing good”.

When companies engage with social and environmental issues that are beyond the requirements of law, they are practising CSR. Some profitable forms may include: improving the efficiency of the production process so that pollution and costs are reduced, and/or differentiating products in the market on the basis of their environmental and social impacts.

My own research originally followed these ideas and explored the various ways CSR could improve profitability. I conducted a case study of a large Australian manufacturer – let’s call them AusMake. They were considered to be a leader in CSR. However, as I progressed with my project, I was surprised to discover that an active focus on profitable CSR initiatives paradoxically led to the reduction of other forms of responsibility, such as the working conditions of staff.

AusMake pursued CSR in a number of technical ways that supported its economic goals. Over several years, AusMake reduced its environmental emissions across its many plants. This was an outcome of its efforts to improve plant efficiency and to reduce operating costs. AusMake also designed and sold environmentally friendly products and services to its customers (at a premium price). In many ways it was the very picture of how CSR can support profitability.

As an inspirational anecdote, this is where the story could end. To the outside, AusMake demonstrated that it is possible for companies to have their moral cake and eat it too.

The company had become good at pressing the right buttons, calling workers selfish or unsupportive if they complained. Shutterstock

But there was more to the story. It was apparent that ‘talking’ about CSR was just as important as ‘doing’ it. On this basis, AusMake’s reductions in environmental impacts were celebrated in various reports. The chief executive officer also made a number of internal statements outlining AusMake’s ‘moral mission’. As a result of this CSR ‘talk’, AusMake managers began to strongly identify with their company’s environmental achievements because it gave them a sense of moral superiority.

Interestingly, the aggressive financial orientation of the firm was never in doubt, despite its ‘moral mission’. Head office put strict targets on its plants to reduce costs. As a result, plant managers reduced staff numbers and increased workloads. Working conditions also deteriorated in the face of these cost pressures. This by itself is not unusual - what is interesting is how CSR supported this financial aggression. Enter the darker side of CSR.

AusMake’s environmental performance gave managers a moral comfort to achieve their cost targets. In fact, many pursued these targets aggressively. So when they were asked to comment on their decision to create harsher work environments, managers said that it served a ‘moral end’. As a ‘responsible’ business, it was AusMake’s ethical duty to be as financially successful as possible. This financial success allowed them to keep saving the environment. Managers had psychologically flipped the vector between CSR and profit. They didn’t just see CSR as a way of finding new sources of profit they saw profit as a form of CSR.

A further paradox came about in regards to responsibility. Staff were told to get on board with AusMake’s financial focus as it underpinned its ‘moral mission’. Staff who complained about increasing workloads and a deterioration of working conditions were labelled ‘selfish’ and unsupportive of ‘sustainability’. CSR became a way of silencing any criticism of the company’s agenda. The paradox here is that in celebrating CSR, other forms of responsibility – like those to employees – were compromised.

The darker side of CSR is that it may give managers a renewed sense of morality in their pursuit of profit. Interestingly, this is yet another way that CSR pays. It doesn’t just find ethical sources of profit; it makes the very pursuit of profit a moral one. In doing so, it gives companies a ‘moral’ licence to pursue profit at any cost and ignore any subsequent breaches of responsibility.

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9 Comments sorted by

  1. David Collett
    David Collett is a Friend of The Conversation.

    IT Application Developer at Web Generation

    Excellent article. Thank-you.

    It reminds me of a company I used to work for. However, instead of having CSR as their moral mandate, they had things like fighting the competition, being innovative, and fun, and having a culture, as moral ends which overruled others - such as employee welfare.

    "It doesn’t just find ethical sources of profit; it makes the very pursuit of profit a moral one. In doing so, it gives companies a ‘moral’ licence to pursue profit at any cost and ignore any subsequent breaches of responsibility."

    I thought this idea was both profound and incredibly scary.

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  2. Andrea Shaw

    Director

    Thanks Max, for such a provocative piece. I find it astounding that many companies pursue CSR activities to the detriment of complying with laws governing corporate behaviour, eg working conditions or paying tax, but that is my experience as well. It is disappointing in the Australian context, but when it happens in low and middle income countries, it can be deadly. The sooner we stop treating CSR as a "get out of jail free" card, the better.

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    1. Max Baker

      Lecturer at University of Sydney

      In reply to Andrea Shaw

      Thanks Andrea. I think the notion of CSR is well intentioned. Perhaps there is some measurable benefit to come from CSR that is beyond the requirements of law. But the pressure imposed by escalating financial targets (whether imposed by financial markets or private owners) has resulted in managers seeing CSR as a point of moral leverage when engaging with regulators, employees, etc. In this sense it worries me too.

      It also reconfirms a rather patriarchal relationship between those that own companies and rest of us 99%ers. I think it makes us further reliant on companies so that not only do we need their employment and products but now we also need their philanthropy to fill in the void left by the retreat of debt-laden western governments. In this way CSR may be a strange bedfellow of neo-liberalism. It assures the voting community that there is still forms of social service being performed despite weaker government systems.

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  3. Mel Phadtare

    Climate Change Advisor at Sustainability Management

    Thanks Max. What your article highlights is how misunderstood the basics of CSR design and implementation are - i.e. the TBL of social, environmental and economic responsibility - as opposed to 'good'. So committing to one or even two of these components aggressively and successfully, while undermining the third component, misses the point of CSR as you demonstrated with AusMake.

    Others have stated the need to integrate ethics in this TBL picture. Ethics can be value-laden so where principles…

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  4. Dianna Arthur

    Environmentalist

    Excellent article - illustrating all too clearly how the most progressive and enlightened of ideas can be effectively twisted into selfish means and spurious results.

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  5. Sebastian Bryers

    IT Business Analyst

    Interesting article. Rather apt that I am about 6 hours away from going into an exam at the University of Sydney Business School in which one of the main questions will be on whether CSR is 'dead' or 'dying' - primarily due to the widespread adoption of Porter's 'shared value' concept by business.

    For someone who approaches business strategy in (what I would consider to be) quite a negative way, Porter seemed pretty optimistic that the 'shared value' iteration of CSR would be good for everyone…

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  6. Paul Richards

    integral operating system

    This issue has become a taboo subject as values change, so appreciate it being raised.
    Max Baker wrote; "... it gives companies a ‘moral’ licence to pursue profit at any cost and ignore any subsequent breaches of responsibility" This goes to the heart of the prime directive within corporate law. The question raised is; do we need laws that put human rights before the profit principle written into law? The answer from the 'other' side is obvious, goes directly to cognitive bias and not hard critical thinking.

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  7. Anjum Amin-Chaudhry

    PhD Candidate at Swinburne University of Technology

    A good article Max.

    If the company's CSR program is one-sided, as seems to be the case here, these things will happen. The CSR programs need to informed by stakeholders' expectations and employees are one very important stakeholder in any organisation.

    Also only giving importance to CSR initiatives that bring direct benefit to the company can bring adverse response from different stakeholders and also negative publicity.

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