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.
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.