Nation & World

Can corporations police themselves effectively?

5 min read

On the surface, one might argue, it looks like the business world is headed in a decidedly socially conscious direction.

Coffee giant Starbucks supports fair prices for its coffee growers. Wal-Mart, the department store dynasty, has instituted a number of measures to lighten its environmental footprint. Companies everywhere tout their eco-friendly products and packaging, and public awareness and support for such trends continue to grow.

But the move toward ethical business practices is not so easily defined, asserted one scholar at Harvard last week (March 6). There is a broader picture to consider when assessing the current state of corporate social responsibility (CSR), one complicated by a variety of moving parts.

The term, CSR, denotes a company’s commitment to socially aware business practices, and its willingness to take responsibility for its impact on people, economies, and the environment.

David Vogel, professor at the Haas School of Business at the University of California, Berkeley, examined the issue (March 6) during the discussion “The Market for Virtue Revisited: The Current and Future State of Corporate Social Responsibility.” The talk was sponsored by the Mossavar-Rahmani Center for Business and Government at Harvard’s John F. Kennedy School of Government.

The discussion was a follow-up to Vogel’s 2005 book, “The Market for Virtue: The Potential and Limits of Corporate Social Responsibility,” published by the Brookings Institution Press.

As he argued in his book, Vogel said the topic is multifaceted, requiring a wide look at the myriad factors that affect socially responsible business behavior.

Does he think CSR is alive and well three years later? “Yes,” Vogel said, especially when one considers the current climate that includes its global expansion, the rise of private codes and regulations, and the array of organizations that monitor and challenge corporate performance. In addition, he noted, the field is now considered a serious area of academic study and research.

The question then to consider, he said, is: “Are companies actually behaving more responsibly as a result of all these efforts?”

A review of some of the nation’s major players revealed a mixed landscape.

British Petroleum could point to its programs and policies around climate change, but it was responsible for a massive oil spill in Alaska in 2006 and a devastating blast at one of its refineries in Texas that killed 15 people in 2005, noted Vogel.

He called the pharmaceutical company Merck’s success at eradicating the parasitic river blindness with free medication in Africa an “extraordinary example of corporate responsibility.” But if one considered Merck’s handling of Vioxx, its arthritis drug pulled from the market due to its heart risks, Merck looked, he said, “less responsible.”

Companies, he offered, are like people. “Most of us do some things relatively virtuously and some things relatively less virtuously.”

A major problem, the author told the lunchtime crowd gathered in the Belfer Center’s Bell Hall, is that CSR frequently takes a back seat to companies’ more pressing problems. When viewed in terms of its relative importance, the risks and opportunities from CSR pale in comparison to the risks and opportunities of normal business practices.

Vogel contended that companies tangled in the subprime mortgage crises would likely have been better served if they had looked harder at subprime pitfalls and ignored CSR risks.

“In retrospect, wouldn’t Citibank or the Bank of America [have] been better off spending their time dealing with the risks of mortgage packaging and resales” than environmental, social, and ethical risks? “The answer is yes.”

Such pressing factors, said Vogel, mean corporate social responsibility “always manages to become the usher but never quite gets to be the groom.”

Vogel also criticized CSR for the unfair burden it places on smaller businesses, particularly suppliers. When better labor standards increase the costs of manufacturing a product, companies are unwilling to pay more for the item, instead making suppliers bear the financial burden.

“It’s a real moral failing of the CSR movement, a real scandal,” Vogel said.

But the Berkeley professor of business, political science, and public policy offered positive news as well. The concept is at the forefront of the minds of all the newest MBA students, and the attractive vision of creating a profitable business that can also save the world isn’t going away any time soon. In addition, he noted, the CSR movement is continually viable because it regularly addresses and incorporates new issues.

There have also been important developments in the political arena. The growing awareness in CSR circles that government support and regulation is a critical part of fostering and promoting CSR initiatives is encouraging.

“The pendulum has begun to shift. … People realize that corporate responsibility without governmental responsibility is not going to quite do the job,” said Vogel, who envisioned a cooperation between the public, private, and government sectors as CSR’s best way forward.