Good Honest Dollar $$

Introduction

This is the third post in a series relating to corporate social responsibility, and the second which deals with the question of whether or not companies should aspire to be socially responsible.

As discussed in the previous post last Friday, there are at least three main objections toward CSR:

• Social responsibility is the business of government, not companies;
• CSR is a distraction from ordinary business activities; and
• Companies should not give out of other people’s (shareholders) money.

This post deals with the second objection.

Defining the objection

The second objection asserts that CSR distracts management from the core business of the company.

By far the greatest contribution that a company makes to society, according to this argument, is from managing its core operations efficiently and effectively. It is the core operations of a company that produce products and services for customers, income for suppliers, employees, owners and lenders, and taxes to pay for roads, schools and hospitals.

The benefit to society which a company provides in the course of managing its operations effectively far outweighs any benefit from ‘sideshows’ such as CSR.

I agree with this argument to a point.

First, I feel that it’s important to clarify what the argument actually states. My understanding is that proponents of this argument are not opposed to adopting positive ethical practices which are simply part of the effective management of business operations.

Good ethics, to a degree, is good business. Good labor and environmental practices are simply good management. Sound corporate governance practices indicate effective management. Ethical sales and marketing practices are effective business practices. Delivering safe, reliable, high quality products to customers is, and will always be, good business.

Positive ethical practices in the above areas are not a distraction – they are simply effective business practices. I do not believe that these areas are what the argument refers to.

Side projects – yes, but first things first

Instead, I believe that critics are referring to ‘side projects.’ These are projects which are not part of a company’s regular operations, but which are undertaken specially for CSR purposes.

Here, I feel that the critics have a point. Whilst I have no doubt that many of these side projects are worthy projects in themselves, such projects have the potential to divert management attention from core business operations.

In my opinion, companies should be encouraged to take part in and support projects which have a positive impact on society even if such projects fall outside of the scope of the standard operations of the company. But it is imperative that such projects in no way divert management attention core business operations.

The first and foremost priority of management must be the production of safe, quality products and services to customers and the deliverance of healthy and sustainable financial returns to shareholders. Only then, will the company be in a position to maximize its positive impact on all stakeholders over the long term.

Non-core projects must never be allowed to distract management from the core business.

Practical Suggestions

Some practical suggestions include putting more resources into fewer CSR projects, targeting projects more closely and limiting participation to projects which are at least loosely related to the company’s regular operations.

The above suggestions are aimed at ‘simplifying’ participation in CSR projects, whilst assisting companies achieve maximum results from the projects which they do undertake.

In addition, the company may be able to minimize the distraction of the project to operational managers by delegating the management of such projects to specialized teams who are specifically allocated to the particular projects concerned.

Conclusion

Companies should be encouraged to participate in some projects where the primary benefit is a social good. But these projects must never force management to take their eye off the ball.

If they do, both the company and its stakeholders will lose out.

Over to you

Should companies undertake specialized CSR projects outside the ordinary course of business? Are such projects valuable or simply a management distraction?

Please feel free to comment on this discussion by clicking on the ‘comments’ section at the head of this post.