#308      33 min 07 sec
When win-win lost: Big business and the myth of Corporate Social Responsibility

Business ethicist Prof Peter Fleming critically examines the concept of Corporate Social Responsibility (CSR) and concludes, that in practice, CSR is tragically compromised. Presented by Elisabeth Lopez.

"You can't have extreme neoliberalism and poverty reduction or equality.  They don't go together.  They cancel each other out." -- Prof Peter Fleming




Prof Peter Fleming
Prof Peter Fleming

Peter Fleming is Professor of Business and Society at Cass Business School, City University London. He researches a wide range of topics concerning the ethical implications of business, management and enterprise, with a special focus on power. He has conducted studies on corporate social responsibility, the changing nature of work in post-industrial societies and the causes of corporate corruption. He is the author and co-author of a number of books, including Resisting Work (Temple University Press, 2014), The End of Corporate Social Responsibility (Sage, 2013), Dead Man Working (Zero Books, 2012), Contesting the Corporation (Cambridge, 2010), Authenticity and the Cultural Politics of Work (Oxford University Press, 2009), and Charting Corporate Corruption (Edward Elgar, 2009). Peter completed his doctorate at the University of Melbourne.

Credits

Host: Elisabeth Lopez
Producers: Eric van Bemmel, Kelvin Param
Audio Engineer: Gavin Nebauer
Voiceover: Nerissa Hannink
Series Creators: Kelvin Param & Eric van Bemmel

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VOICEOVER 

 


This is Up Close, the research talk show from the University of Melbourne, Australia. 

ELISABETH LOPEZ 
I'm Elisabeth Lopez.  Thanks for joining us.  It's a debate as old as the industrial revolution.  Does business exist simply to provide goods or services at a profit or do firms have wider obligations to the communities in which they operate?  Look on the website of just about any company and you're bound to find a section on CSR or corporate social responsibility.  How the organisation manages its social and environmental impacts as well as its financial performance.  Responsible business is now being seen or at least being promoted, as not just doing good but as conferring a strategic advantage and creating value in its own right.  
Yet in his 2013 book with Mark Jones, The End of Corporate Social Responsibility, Professor Peter Fleming claims corporate social responsibility is fatally compromised and in the hands of multinational corporations often does more harm than good.  Peter is Professor of Business in Society at Cass Business School at City University, London and he was our guest two years ago on Up Close talking about his book Dead Man Working.  Welcome back Peter.

PETER FLEMING
Thank you very much for having me back.  

ELISABETH LOPEZ
Peter, what is corporate social responsibility and why is it such a big part these days of what firms say publicly about themselves?

PETER FLEMING
Well as you said in your introduction CSR or corporate social responsibility has in essence been around for a very long time.  However over the last 20 years it's become a prominent kind of discourse in and of itself in which it is assumed that businesses can integrate not only the profit motive into its business model but also social needs for example, poverty reduction, environmental needs for example reducing carbon emissions and a whole set of other non-economic issues that business would normally not be interested in.

ELISABETH LOPEZ
What's been the driver for that?  Is it simply part and parcel of globalisation?

PETER FLEMING
Globalisation is part of it but I would argue that the rise of CSR in even some of the most controversial industries like the mining industry for example, is probably more of the result of a deep legitimacy crisis facing business today.  Even non-experts - you talk to someone on the street, they're very cynical about the role of business in society and whether they can deliver the needs to everyone concerned.  The government of course, is very worried about the legitimacy of business as well because if they're seen to be backing large organisations too much then they get voted out and there seems to be a compromise in terms of their democratic brief.  
So I think a deep legitimacy crisis is behind a lot of this rise in corporate social responsibility to try and regain some sort of confidence and faith among those in society who feel that they've been hard done by, by the rise of large corporations.

ELISABETH LOPEZ
Peter, what has caused this crisis of legitimacy?  Has it been economic crisis or has it really come about through groups who've been adversely affected by different corporate activities like the mining industry?

PETER FLEMING
It depends on when and where you're looking at but in the west and particular in the United States, Enron the failure of Enron and the revelations that were just absolutely shocking had a massive impact on the legitimacy crisis of business in the United States and beyond.  And since Enron we've seen time and time again large organisations are being charged with various types of misconduct.  It seems to be this kind of recurring sense that organisations are breaking the rules, are really kind of trying to maximise profits at whatever cost and I think with the financial crisis - the global financial crisis, that's really been emphasised in people's imaginations.  
And of course globally inequalities are growing at a rate that we haven’t seen ever since the beginning of capitalism, the modern period.  Environmental degradation seems to be exponentially increasing so despite all of this talk about corporate social responsibility, things seem to be getting worse on almost every measure.  So I think that organisations in a whole range of industries are really trying to shore up their legitimacy in the face of consumers, in the face of governmental pressure, in the face of protest movements which have been very important for raising these issues.

ELISABETH LOPEZ
Is it simply a face saving thing that firms engage in or are there actually firms doing good stuff out there?
PETER FLEMING
There are lots of firms doing very, very good things, I would argue.  There are some industries that are very, very committed to trying to bring society and business back together again.  But I guess what we argue in our book is that as a whole, as a totality, given the rise of CSR corporate social responsibility, ethical branding, an attempt to integrate social and environmental needs into its organisational business model, things have actually got worse.  And that's really what we're trying to address in this book.  

ELISABETH LOPEZ
Can we go back here and I guess just talk about some of the forms corporate social responsibility takes?  Is it the same as corporate citizenship?  What are we looking at?  What does it look like?

PETER FLEMING
It takes many, many different forms.  It could be for example, corporate citizenship in which large corporations begin to take on governmental-like roles with regards to human rights et cetera et cetera.  It could be related to sustainability, the idea that organisations build into their operating logic an idea that sustainable environmental and social needs can be carried into the future for future generations.  It could be the triple bottom line in which not only economic issues are taken into consideration but also social and environmental issues as well.  It could be branding, ethical branding which has obviously been criticised as greenwashing or whatever by many people looking into these things.  It takes many different forms but in essence it is the idea that a for-profit organisation can create a win-win situation rather than a win-loss situation.  
In other words what's good for business can be good for society and non-economic issues and stakeholders as well.  The more and more we looked into this issue the more and more we become quite sceptical about whether this can be achieved under the present socio-economic paradigm which some people have called extreme neoliberalism.  

ELISABETH LOPEZ
A lot of the global business magazines like Forbes have annual lists of the best corporate performers in CSR and firms like Google and Apple and Microsoft come up with programs that sound fantastic, for instance for staff to engage in volunteer work or pet projects to help different communities.  Have you had a look at some of those and really gone deeply into their implications?

PETER FLEMING
We have.  Unfortunately it deepened our scepticism a little.  I don't want to sound too negative here but if you look for example at one of these big measures, the Dow Jones Sustainability Index which is a very important and very well-known indicator of whether businesses are kind of living up to the hype of their CSR policies.  If you look at some of the organisations that get a five star rating, we've got tobacco companies who in essence kill hundreds of thousands of people through their products.  They seem to be considered some of the best socially responsible organisations in the world.  You've got organisations that we would consider if you stepped back, from a common sense perspective, would be considered to be rather controversial.  These are the organisations that seem to be winning if you like, all of the awards on these measures. 
And sure there are IT firms that are very committed to their employees and to the social needs of the environment and society, but even the revelations around spying, the Snowden revelations, we realise that all of these so-called good companies were highly implicated under very dubious governmental spying practices.  And so when we get behind the scenes and find out what's really going on we can compare that to the hype that we get told on websites and so forth.

ELISABETH LOPEZ
So it seems to be for some firms that are engaging in toxic products or products and services that are harmful, that they're prepared to do and spend just about anything as long as they can keep continuing a very problematic core business.  

PETER FLEMING
That would be one of our arguments.  And we're not saying all organisations around the world are damaging in essence.  But we would argue that with the rise of corporate social responsibility we would see it more as an excuse to carry on as a for profit unregulated some would say, rather profiteering approach to their business rather than having other stakeholders have a genuine say in the way in which business is organised in society.  
For example, here in London where I'm speaking to you from, the banking industry is in deep crisis regarding its legitimacy.  And corporate social responsibility here has played a major role because basically the message is hold on, don't regulate us, don't stop us from doing what we've done up till now which of course has caused so many problems.  We can take care of it and we've got a CSR policy that will do this.  It's voluntary and we'll try our best but please don't step in and allow other stakeholders to start having a say regarding how we do our business.  Because if they did, then we would have to change things quite dramatically.  We would have to become more transparent; we would have to become more democratic; we would have to become more accountable to those who we are potentially damaging in society.  So don't do that, don't regulate us.  Instead we'll take up a CSR policy.  That's basically their logic, right.  In other words it's a good excuse for business as usual.  

ELISABETH LOPEZ
So if part of the rationale for some firms is to keep one step ahead of the regulators, what does that mean in terms of the people within firms who are supposed to strategize CSR policy and implement it?  Are they playing a strange double game?

PETER FLEMING
I've talked to a lot of CSR officers and large organisations from banks to mining industry to a whole host of institutions including the university of course, which tries to adhere to some corporate social responsibility objectives.  They're in a very difficult position, very difficult position.  Seldom are they at the heart of the way the business runs.  In other words, CSR is seldom within the financial department of an organisation that really is the driver of revenue.  CSR officers seldomly are in those meetings.  But nevertheless they have to face up to the public; they have to face up to the governmental regulators to say what the organisation is doing to achieve these socially progressive goals.  
So they're in a bit of catch 22 here because first of all their organisation is basically revenue driven, say a large bank for example.  But at the same time these CSR officers are trying to actually make a difference.  I don't think they're too cynical, I think they really do think they can make a difference and in some cases they do.  For example, volunteering, supporting your local schools et cetera et cetera.  But they are in a very kind of difficult situation and I've seen people kind of mention that time and time again when I've spoken to them.

ELISABETH LOPEZ
Are we more likely to see CSR officers allied with the marketing department for example or human resources?

PETER FLEMING
Human resources is a recent development because corporate social responsibility now is important for attracting people and motivating people and retaining people.  So I would suggest that both the PR department who know how the organisation is pitched to the public and to the press and to governmental regulators.  But also in the HR department as well because CSR is important because people like you and I are worried about the world we're in.  We're seeing major environmental issues time and time again in the newspapers.  We're worried about corruption.  We're worried about working in these organisations.  So corporate social responsibility has been quite useful in that regard for large businesses for attracting normal ethical people.

ELISABETH LOPEZ
I'm Elisabeth Lopez and you're listening to Up Close.  In this episode I'm discussing corporate social responsibility with business ethicist Peter Fleming.  Peter, we've seen the rise of the business case to sell firms on the idea of concepts like diversity in their human resource management for example.  Rather than the right thing to do, it's the profitable thing and you've noticed that there's a big focus in management journals on whether or not CSR makes money.  What happens when it doesn't?

PETER FLEMING
When CSR doesn't make money, sometimes, a large organisation for example, a mining firm or a petroleum firm would say, well it's a loss in economic terms but it's a useful loss.  Because we're willing to throw away this money for the PR image that having a strong CSR policy gives us.  For a lot of organisations they know I would argue that much corporate social responsibility except for example in certain industries where it is actually part of the business model.  But for many other organisations in the mining industry and the resource industry and controversial product industries, they're willing to take the loss.  Because it's very difficult to disentangle the benefits of having at least something on your website, usually smiling African children sort of drinking from a fountain, rather than not having it, because when something goes wrong at least they can tell the government inspectors and investigators, well we had something in place.  This is an aberration.  We'll try better next time.  If they never had anything in place which is making a loss then they would be in bigger trouble.

ELISABETH LOPEZ
You say in your book that we need CSR more than ever but that rather than having ended really, as the title of your book suggests, it's not really begun.  Could you explain that?

PETER FLEMING
Sure.  So we begin our book by saying that our title's a little bit misleading because “The End of CSR” suggests that it began and we suggest that it hasn't really begun because it's never really been taken seriously.  From its beginning CSR as a practice and as a theory has had a kind of an inbuilt cynicism in which it's not really supposed to be taken too seriously.  So in our book we're all in favour for corporate social responsibility.  We think it's a great idea.  We're not critical of it whatsoever.  We think it's got some great ideals.  We think it's got some great potential.  
But if you look in practise how it actually gets adopted it's never really taken too seriously.  In other words, oh yeah let's have some corporate social responsibility, but only up to the point where it makes us money and when it stops you know that's when we've got to be a little bit more flexible about how we use it.  So we would argue that if we really took corporate social responsibility seriously and actually integrated it into every part of the business, we would see some major transformations.  We would see a whole paradigm shift in the way in which business is done. So it's that inbuilt cynicism that we should not take it too seriously that we question within the book.

ELISABETH LOPEZ
What would it look like if it were taken seriously?

PETER FLEMING
It would look like social democracy, I would argue.  It would look like transparency and stakeholder involvement in the way in which institutions run that affect them.

ELISABETH LOPEZ
What would change within firms or within how these activities are structured within firms?

PETER FLEMING
First of all the myopic approach on profit maximisation would be tempered.  It would be tempered by other social discourses or logics.  Take for example the post office.  Now a privatised post office like we have here in England most recently, is now owned by large institutional shareholders who want a very, very, very quick short term profit.  We'll try and do as much as possible to gain that short term profit.  Some of the shareholders, not necessarily in our post office organisation but around the world, are hedge fund institutional investors.  And they don't really care if the organisation suffers.  In fact they're willing to sweat an organisation, in other words damage it for a short term profit because they're looking at a matter of months to make their profit and then they're out.  
So for a genuine corporate social responsibility approach to an organisation looked like that was a case.  Well first of all there would be limits when an institutional investor can get in and can get out.  Rather than that short term damaging maximisation of profits.  Second of all the worker, the people employed by the organisation would have a lot of say over the way in which the organisation runs rather than being just seen as a human resource that can be discarded to one side whenever profit maximisation objectives are being challenged or potentially in danger.  
Third of all you'd have the consumer or I would say, you know, the recipient of this social good because we all need to send letters, having some say in which the organisation is run as well.  Now that might not be directly in the business model but there'd be some sort of measure in which consumers can basically say, is this working for us or not or are we just being price gouged by higher prices?  Which seems to be the case when any public good becomes privatised. 

ELISABETH LOPEZ
Can this culture change take place at the level of the firm or does it need a very active and engaged public and a very robust framework of government regulation for this sort of thing to eventuate?

PETER FLEMING
It would need a lot of things I think.  It would need a culture change in the organisation in question.  That would be very, very important rather than seeing the organisation simply as a vehicle for private extreme wealth/gain.  You would have to have a different culture regarding the social good which has been depleted in many organisations over the last 20 years for obvious reasons.  You would have to have not necessarily government involvement because most governments around the world aren't that democratic, let's face it.  You would have to have some sort of democratic involvement.  Some sort of stakeholder involvement that is genuine and that may be through local public institutions such as councils; that may be consumer organisations; that may also be the government as well.  But not many people trust the government these days given all of the revelations and the bail outs et cetera et cetera.  
So I wouldn't necessarily only look at governmental regulation.  You'd need to change quite a few things.  But in some ways this isn't impossible.  It's happening in countries all around the world.  We tend to think that our extreme private profit driven culture is the norm around the world and it's not really.  There are many institutions in South America for example, that have changed the whole way in which their society runs,  that's a little bit fairer.  Obviously with all of the problems that come along with that.  So I would argue that what we have today is actually kind of an extreme case rather than the norm around the world.

ELISABETH LOPEZ
Can you tell us a bit more about one of those places where we are seeing more, I guess democratic forms of corporate citizenship?  

PETER FLEMING
For example, Chile where after years and years of foreign control usually US multinational corporations, usually backed up by junta are very violent, very militaristic has regained some really kind of strong sense of social democratic spirit in which university students are becoming more and more agitated and more and more involved in basic institutional delivery of goods both public and private.  You have more of a democratic spirit in which organisations and the government are held accountable for some of the things that are happening in society.  This probably is because it's got an extreme history in which it has truly been a victim of multinational globalisation and there's been a fight back.  
Now none of this is perfect and my friends from Chile say, yeah well that's true but look at this and look at this and look at this.  These are all problems and there's no perfect situation.  But at least there's a tendency that we could say, okay it is actually possible.  So there are many situations around the world I would suggest that hold up some hope for the way in which business and society could be brought back together again.  Which let's face it, is the professed ideals of CSR.

ELISABETH LOPEZ
This is Up Close.  I'm Elisabeth Lopez in conversation with business ethicist Peter Fleming.  Peter, I wanted to ask you how important are leaders in all of this?  You teach at one of the world's top MBA schools and since the global financial crisis, many business schools have now made ethics a compulsory part of the curriculum and they're focusing more on CSR.  What impact do you think this is going to have on how future leaders of firms engage in these questions?

PETER FLEMING
That's a very good question.  Leadership I think is very important.  I wouldn't want to hold it up as the ultimate ideal.  I think that things happen in organisations despite whose leading it or not.  Some of the things that drive organisations are institutional and they have their own logic despite a leader.  Some of these things that happen in organisations are driven by the environment despite the leader.  Having said that I think that the people who are charged with the responsibilities of the organisation in question, whether it's a bank, whether it's a petroleum company or whatever, certainly can make a difference in the tenor of the firm.  In other words, how extreme is the organisation going to be pursuing its particular profit maximisation objectives?  What type of culture do we have in an organisation?  Is it going to be extremely risky or attracted to risk which has been a major problem in the financial sector of late?  Or are we going to have a culture that's a little bit more risk averse and that recognises the role the organisation has for the wider public good within which it operates?  
Leadership I think is important, very, very important.  I think followership is probably more important as well.  You know, are people in an organisation able to hold to account those who are charged with running the firm?  What type of mechanisms do we have in place for whistleblowing?  What type of feedback forums do we have in organisations that keep the board of directors in line with some of the CSR objectives?  This is difficult because we're living in the age of shareholder capitalism.  For example, I'm a business ethicist.  If I was dropped in as the CEO of a large petroleum company that's owned by shareholders, good chance that I'd be doing exactly the same as what they're doing.  Because if I don't, I'd be fired by my shareholders.  It's a difficult issue.  I think leadership's important but we must place it within the context of the society and the business society we're operating within.

ELISABETH LOPEZ
Obviously capitalism is extremely intense with the hyper globalisation that we're seeing now.  So I'm wondering if that automatically renders a lot of CSR efforts icing on the cake rather than integral to the business.

PETER FLEMING
That is a danger.  We're living in a very extremely commercially driven global economic system.  In that context a lot of the CSR that we hear about does start to look pretty impotent unfortunately.  However, at least it opens up an avenue for dialogue.  We would not be having this conversation that we're having now if it was not for corporate social responsibility discourse out there.  So at least it's an avenue into these questions regarding what ought to be the role of a business and a society that is just.  That is a hopeful thing I think.  
Also I think we've got to be very careful about who we point the finger at.  In this discussion we've been pointing the finger at corporations.  You know we need to look at governments as well.  Some of the worst offenders in this regard are nation states, are governments who lack the backbone or commitment to any of these issues, who have their own CSR policies trying to convince the public and the voting public in particular that they're trying to do good for society.  Some of the governments around the world have a flagrant disregard for climate change for example.  Some are even climate change deniers.  So I think we have to be careful who we point the finger at and we should be pointing the finger at ourselves a little bit as well I think.  

ELISABETH LOPEZ
Peter, you in your book criticise quote: the liberal precept that social ethics and capitalism can be reconciled, yet you say fatalism is not helpful.  What is the upshot of I guess taking those two statements seriously?  

PETER FLEMING
The upshot would be that first of all we've got to recognise that the widespread idea that rampant capitalism - what I would call extreme neoliberalism and social goods are often very antagonistic objectives.  Often they are contradictory.  In other words you can't have extreme neoliberalism and poverty reduction or equality.  They don't go together.  They cancel each other out.  So as soon as we recognise that, what do we do?  Well there are two options.  We can abandon the very idea of ethics in the face of the realisation I've just stated, which I would not recommend at all.  Or we could start to modify the very economic paradigm that we work in to become at least possibly more aligned to some of the ethical ideals that all of us hold on to.  
For example, equality.  For example, no one - I don't even think the most senior profiteering manager of a large organisation I don't know where, would be in favour of species extinction.  I would say that would be pretty much a universal ideal that we would all hold on to, that species extinction is a bad thing.  But nevertheless this is happening, you know, on an exponential rate right now.  So do we abandon that ideal or in the face of the coming apocalypse that may never come, do we begin to try and make inroads into the economic paradigm that seems to be creating all of this wealth for some, but has so many costs involved that many of us are beginning to say are unacceptable?  

ELISABETH LOPEZ
Peter, if the profit motive that is at the heart of capitalism prevents firms from deviating too far from that mission, are we reliant on consumer led or activist group led action to affect the sort of cultural change you're talking about?

PETER FLEMING
I think consumer activism is important but it's probably not the only thing we would want to rely upon to try and make a difference in the way in which some of these organisations operate.  I think consumer driven concerns and monopolithic industries - we're talking about railways, the waterways.  We can really see citizenship rights being expressed by consumers in that regard and that is exerting pressure not only on organisations but governments, to try and change the way in which these services are delivered.  
However, what is consumerism about?  It's about buying stuff, goods and services.  So can we buy ourselves out of this mess that we seem to be in?  So I would temper, temper my positive comments regarding the empowerment of the consumer with a caution regarding the mode in which those concerns are expressed.  I think that consumerism is a big part of the problem rather than the solution.  

ELISABETH LOPEZ
Because we don't need to be buying more stuff.

PETER FLEMING
Pretty much.  One of the important assumptions of corporate social responsibility is that if we make our products more ethically friendly then we can sell more stuff.  The problem or the contradiction here is that selling more stuff regardless of whether it has a green label on it or not, breeds a mentality that is linked to some of the problems that we're facing now in the global system, in which ramping consumerism is unsustainable and has spill-over effects in all sorts of quarters of society that we would consider to be rather problematic.  So consumerism might be one avenue for putting pressure on organisations to temper or to modify a myopic focus on profit maximisation, short term profit maximisation.  But we would have to look at other avenues as well that aren't necessarily linked to more and more consumption.

ELISABETH LOPEZ
Twitter.

PETER FLEMING
Twitter might definitely be an important part of this.  Social media has really made a big difference I would argue, in relation to many of the things that we're talking about.  We're no longer reliant upon established conservative institutionalised news outlets for the information that we learn about what's happening in society.  And social media has really, really made a big difference in informing people.  People in power are deeply afraid of it.  Afraid of the empowering influence that social media can have on every day citizens.

ELISABETH LOPEZ
So Peter, if consumers using their market power to affect cultural change is fraught, what about taking these concerns to the ballot box or applying pressure in the tried and true conventional political channels?

PETER FLEMING
Well governmental state institutions are still the most powerful institutions in our society and basically make the rules of the land, so they are important for any changes that may or may not occur.  The only problem there though is that people are so disillusioned with the idea of voting making a difference.  Voter apathy is currently at an all-time high pretty much throughout every western country that I can think of, simply because they see so-called democracy as a spectacle.  It's to be seen on TV but not to be participated in.  That would have to be a challenge I would think to see voting as a way in which pressure might be exerted.  
However, having said that, voting is not the only way that pressure can be exerted on governments.  It can occur in a whole set of other ways as well from petitions, from protests, from using social media in particular ways to raise concerns.  There are a whole host of other forums that could be used to put pressure on governments to make a difference.  

ELISABETH LOPEZ
Peter Fleming, thanks very much.

PETER FLEMING
Thank you very much for having me.

ELISABETH LOPEZ
Our guest on Up Close was Peter Fleming, Professor of Business in Society at Cass Business School at City University, London.  He's co-author with Mark Jones of The End of Corporate Social Responsibility and the 2014 book Resisting Work, the corporatisation of life and its discontents.  If you'd like more information or a transcript of this episode, they're available on the Up Close website.  Up Close is a production of the University of Melbourne, Australia.  This episode was recorded on the 20 June 2014.  Producers were Eric van Bemmel and Kelvin Param.  Audio engineering by Gavin Nebauer.  Up Close was created by Eric van Bemmel and Kelvin Param.  Thanks for being with us.  Bye for now.

VOICEOVER
You've been listening to Up Close.  We're also on Twitter and Facebook.  For more information visit upclose.unimel.edu.au.  Copyright 2014, the University of Melbourne.


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