CSR ：a religion with too many priests?

CSR – a religion with too many priests?

Michael Porter is perhaps the management ‘guru’ most listened to and respected by corporate boards and executives worldwide. But his  keynote  speech  on  the  role  of  corporate  philanthropy  at  The European  Academy  of  Business  in  Society’s  2nd  Colloquium  at Copenhagen Business School in September 2003 provoked strong reactions  from  an  audience  of  mainly  European  academics  and business  managers.  Here  Mette  Morsing,  associate  professor  and director  of  the  Center  for  Corporate  Values  and  Responsibility  at CBS, talks to him about his interest in corporate social initiatives, the implications  for  corporate  competitiveness  and  his  call  to academics to provide a conceptual framework for the topic.

Morsing： ‘Strategy’ and ‘competitiveness’ are the two key words that characterise your research. How did the area of corporate philanthropy and social initiatives enter your research?        

Porter I used to see this area of corporate social philanthropy as the last thing on my agenda ten years ago, but now I agree that social and economic issues are intertwined. Corporate philanthropy – or corporate social responsibility – is becoming an ever more important field for business. Today's companies ought to invest in corporate social responsibility as part of their business strategy to become more competitive. Corporate success depends on the local environment: an appropriate infrastructure, the right

types and quality of education to future employees, co-operation with local suppliers, quality of institutions, local legislation, and so on. In this corporate competitive context, the company's social initiatives – or its philanthropy – can have great impact. Not only for the company but also for the local society.

Morsing： Where do you see the basic challenge today for corporate social initiatives?

Porter： Social initiatives are usually associated with doing good and ‘doing the right thing’, and today many leaders feel they have to contribute to this development. Many companies want to engage in philanthropic efforts because it will improve their reputation. It is easy to agree that we ought to be doing something good, and that we should contribute to doing ‘the right thing’ for society. No one will disagree with this noble ambition. For me, however, that is not the interesting question. Although there is a lot of feeling that ‘we ought to do it’ amongst executives and a lot of corporate statements about companies' social ambitions and efforts, there are also a lot of uncomfortable sentiments about why companies should be doing it. Corporate leaders are now giving lip service to this area, but they do not ultimately understand it. No matter what they say in public, when you get behind the scenes with executives and directors, they will ask you "why should we invest in social initiatives?" We may all care deeply about saving the world but if we cannot answer this question properly, we have a problem.

Morsing ：Why is that question not answered properly?

Porter： My major criticism is that the field of corporate social responsibility (CSR) has become a religion filled with priests, in which there is no need for evidence or theory. Too many academics and business managers are satisfied with the ‘good feeling’ as argument. Much corporate philanthropy is driven by top management's personal beliefs. It is their pet project. And almost all corporate philanthropy is about brand enhancement and gaining a reputation as a positive citizen. It is about winning friends. Corporate leaders feel pressured by activists to take action on various social issues, and by donating money to a social issue they make friends and positive associations. The ‘feel-good’ of corporate philanthropy seems to be evidence enough. I disagree completely.

Morsing： But why is it not enough that leaders want to do the right thing, and that some of them actually believe they are doing the right thing?

Porter： My concern is that companies are reacting to pressure rather than having their own affirmative strategies. The ‘giving’ is not integrated into strategic thinking, and quite a few corporate leaders are not sure that the money they spend is well spent. If we want to make sure that companies – not leaving it to individual leaders – are to maintain an interest in corporate social initiatives we have to provide the rationale for them as to why they should be doing it. If companies are just being good and donating a lot of money to social initiatives then they will be wasting shareholders' money. That is not sustainable in the long-run, and shareholders will quickly lose interest. Giving money away is easy, but if that is all it is going to create cynicism – among shareholders, managers and employees.

In times of economic pressure and profit warnings, companies will back off. Right now it is all a defensive effort, a PR game in which companies primarily react to deal with the critics and the pressure from activists. Have you noticed how ‘sensitive’ industries like the petrochemical and pharmaceutical industries tend to give more than ‘non-sensitive’ industries? They need permits, they are under pressure, so they react. When companies get caught in the dilemma of simultaneous pressure from activists and shareholders, then they have a problem. You cannot just put more money into social initiatives when you are pressured to improve your earnings.

Morsing： So what should companies do?

Porter： I believe we in the business world need to be more offensive. Right now we are apologising for the company. We are defensive, and businesses are engaging in corporate philanthropy to avoid scandals and to be liked. That is a dangerous route. Companies need to move away from defensive actions into a proactive integration of social initiatives into business competitive strategy. Basically I think that business should be proud of what it is doing: business makes the economy work. The money comes from business – not governments. Business should not try to solve all societal issues. It should concentrate on fairly tangible business operations, and this is what I refer to as the corporate competitive context. In doing so it needs to reconcile the challenges from shareholders and activists at the same time.

The only way companies can gain respect in this area is to do something which no one else can do. They should be asking themselves if they can do more than simply write a cheque. They should ask themselves: ‘are we creating as much value as we can?’ If companies work in environments in which the educational systems do not work well, then companies should contribute. Cisco is a good example: Cisco Systems is the world's leading producer of network routers, and the company's growth is limited by the number of trained network administrators worldwide. Within five years Cisco has established around 10,000 academies around the world. It serves society as well as the firm. No government could have done that, and no private foundation would dream of doing that.

Shell is another good example. Shell has a big interest in oil investigations in the Mexican Gulf. There is a huge problem with erosion and destruction of the Mexican coastline, and Shell has engaged intensely in this project, because Shell can probably do more than anyone else with its expertise. At the same time, if nothing is done, Shell will have no access to these oil deposits. Solving the environmental problem is fundamental for its business. It is not just a question of ‘feel good’. If corporate philanthropy is not related to businesses' competitiveness and skills then governments and philanthropic organisations should be doing it.

Morsing： Where do you see the role of academics in the field of corporate philanthropy?

Porter： The first stage has been an acknowledgment of ‘we need to do this’, and the second stage was about making case studies. Today we need to move beyond the advocacy. We have to justify this activity, otherwise we will have a sad state of practice. What academics need to do now is to provide careful thinking, a clear rational framework, evidence and intellectual argumentation for answering the question of: ‘why should companies do this?’ I see this as equivalent to the environmental agenda 15-20 years ago: poor process design and ineffective use of resources and material set off investments in developing the environmental agenda. Today the environmental agenda is about how to improve efficiency, productivity and processes. Now we need to do the same on the social agenda. The other important question is: ‘how can companies be most efficient in their corporate social initiatives?’

Morsing ：How should business schools teach the corporate social agenda?

Porter： There is no need to educate young people of today to change their mindsets towards corporate social initiatives. They already have the mindset. What they need are tools and sound, persuasive argumentation for why corporate philanthropy matters to corporate competitiveness.