Opening Pandora's box: corporate social responsibility exposed.

• Author: Ludescher, Jessica C.
• Position: REFLECTIONS - Essay

Corporate social responsibility (CSR) refers to any activity that promotes the welfare of any stakeholder of a business corporation. Sometimes CSR refers to philanthropic programs targeting communities or employees. Other times it refers to commitments to promote the welfare of suppliers. It also refers to a variety of activities designed to enhance environmental stewardship (sustainability). More generally, it refers to the vague intention to better society (corporate citizenship). When used very loosely, the term can be conflated with general ethical practices with regard to customers, investors, or any other stakeholder. In short, the term has a variety of meanings and applications. As it is used today, it can be applied to every business in all industries. The CSR concept's looseness and generality enable it to encompass such a wide variety of ethical practices that it has practically become meaningless.

CSR's Limitations, Biases, and Nonsensical Applications

Although CSR has served us well in shifting popular consciousness regarding global ethics, the concept now lies on its deathbed. The successive collapse of various prominent financial institutions points to a major problem with CSR--namely, that companies can use it to conceal financially risky strategies to pursue short-term gain by means of high-profile bankruptcy. Many formerly esteemed companies, not the least significant among them being Enron and Washington Mutual, touted their CSR activities and were widely praised for them. While these companies were disbursing philanthropic goods to the public, however, they mismanaged their own affairs, and as a result their more immediately implicated stakeholders--the shareholders and the employees--paid a high price for the management's incompetence, greed, and charity.

CSR's ludicrous nature is perhaps best exemplified by the fact that numerous banks and other companies in the financial services industry engage in philanthropic initiatives with regard to low-income communities and environmental stewardship. Upon surveying the wreckage of bank collapses and the subsequent global financial tsunami, we find that the unethical nature of these CSR practices has at last become visible to us. The financial firms are not alone in trading off CSR against business survival. Their compatriots in corporate hypocrisy include any businesses in any other industries that lose sight of a long-range focus or court bankruptcy as a competitive strategy while lauding their CSR initiatives.

CSR's gravest danger may be that it diverts our attention from the deeper ethical issues surrounding the real value of products and toward superficial considerations of business/society engagement and organizational ethics. CSR becomes nonsensical when it is applied to businesses whose mission is to create products that are addictive, hazardous, or destructive.

Some theorists and consultants recommend the exclusion of all such companies from the CSR category, regardless of the companies' stated commitments to social responsibility. For example, many socially responsible investment (SRI) funds screen out entire industries: defense, nuclear, tobacco, gambling, alcohol, sex. However, many companies in these industries still practice CSR, by definition, because they do philanthropy.

The inconsistency in stakeholder treatment that businesses practicing CSR can get away with can be identified most readily in businesses that manufacture products of dubious ethical value. However, the SKI screens tend to focus on so-called sin stocks at the risk of religious moralizing and the cost of failing to notice the degree to which companies in other, supposedly noble industries also manufacture ethically problematic products. For example, companies in the financial services, defense, pharmaceutical, medical insurance, and entertainment industries have been accused of peddling unnecessary, frivolous, and ridiculous products, not to mention utilizing predatory strategies that pressure the purchase of or deny access to these goods and services.

To be sure, all of these industries generate products of some value. Societal wealth, national security, human health, and entertainment are objectives critical to the maintenance of a decent and becoming human existence. Yet companies in all of these industries exceed the necessity of the good they create to the point that they endanger and destroy human life and create poverty, fear, addiction, and dependence instead of wealth, security, health, and well-being.

Let us examine the defense industry to expose the deep trouble with the CSR concept. Defense companies like to practice business ethics and CSR by producing high-quality goods and services for their government customers, promoting internal workplace diversity, performing community service, and establishing philanthropic programs such as scholarship funds. The fundamental flaw in praising these CSR initiatives is that defense companies are in the business of designing weapons and military...