One of the hotly debated topics in the field of business ethics at the moment seems to be the question of the type of impact which the current challenging economic environment will have upon Corporate Social Responsibility (CSR) – efforts on the part of companies to conduct themselves in a manner which is responsible from a social, economic and environmental perspective as well as a business perspective.
My thoughts – overall, I would not be surprised if many companies seek to pare back their level of CSR related effort, particularly as firms are, as The Economist puts it:
“.. a long hard look at the resources they devote to everything from supporting charities to making their activities carbon neutral.” (refer article)
However, CSR encompasses a very broad range of activities, and I would think that the impact of the challenges associated with the current economic environment will vary according to the nature of each particular activity.
Observations about the impact of the downturn from a CSR perspective
A thorough examination of the likely impact of the downturn with respect to each type of CSR related activity is well beyond the scope of this discussion.
Nevertheless, I would like to make a few observations:
• Corporate philanthropy.
Probably one of the hardest hit areas, not least because this form of CSR: (a) involves the direct outlay of scarce financial resources, as well as benefits which can be difficult to quantify and are often expected to accrue over a lengthy time period; (b) expenditure in this area can be curtailed without a great degree of direct or immediate impact upon a firm’s business operations.
Regardless of how moved one may be by Ford’s assertions that it remains ‘committed to the concept of giving,’ the fact that the automaker expects it’s corporate donations to be down forty per-cent next year (refer article linked to above) speaks a great deal about the prospects of any areas of corporate philanthropy which are not very closely related to an organization’s operations or direct branding strategy.
• Community Business Partnerships.
Commitments to these types of partnerships, which typically involve social or environmental partnerships between companies and NPOs or community groups are generally of a fairly long term nature.
With respect to existing projects, I doubt there will be many cases where firms reneg on commitments which they have already made. Compared to straightforward philanthropy, I would have thought that these kinds of projects would generally tend to be more closely aligned with both operational requirements and branding strategy, reducing the likelihood to which they would be subject to curtailment. Moreover, corporations would find it difficult to pull out of their commitment to such projects without suffering considerable damage from a reputational viewpoint.
That said, I would not imagine that firms would be particularly keen right now to enter into new commitments in this area. With short term survival proving enough of a challenge for some firms, I cannot imagine that investment in new social partnerships would exactly be a top priority.
• Investment in energy efficiency and environmental improvements.
Probably the most risilient form of CSR at the moment, particularly given the extent to which energy efficiency helps improve not just the environment but the bottom line through cost reductions as well as government enthusiasm to direct stimulus related funding toward any areas with a ‘green’ label attached to them.
That said, I would have thought that investment in some of the more capital intensive projects may be subject to some degree of curtailment, particularly in cases whereby large portions of the anticipated cost reductions are not anticipated to be realized until the project concerned has been operating for several years.
Genearal comment – back to core business
Overall, whilst I would certainly have thought that some areas of CSR related effort may be subject to curtailment, I do not imagine that firms will abandon the concept altogether.
Instead, what is more likely is a refocusing of CSR effort toward projects which: (a) are more closely tied to branding strategies or business operations; (b) are anticipated to produce business benefits of a more obvious and (ideally) quantifiable nature; and (c) do not involve large outlays or long term commitments of financial resources.
Any forms of CSR efforts which do not fit the above criteria, I would imagine, will be the subject of an increasing level of scrutiny among corporate boards.
Over to you
What do you think the near term future holds for CSR related effort?