CSR: What is it, Anyway?

Posted by Elaine Appleton Grant on June 19, 2011
CSR: What is it, Anyway?

Business for Social Responsibility (BSR), the flagship organization for socially responsible businesses, defines CSR as "respect for ethical values, people, communities, and the environment." The basic idea is simple-but the execution is extraordinarily complex.

When a company makes a commitment to respect "people," for instance, the initiative needs to extend not just to employees, but also to customers, shareholders, suppliers and their employees, and residents of communities from which the company obtains its raw materials, among others. To give an indication of the breadth of the issue: BSR provides fully 53 different issue briefs on CSR, ranging from reports on child labor to primers on corruption and bribery.

Every company has its own way of pursuing CSR goals, generally dedicating its resources to those areas that are most relevant to the business. For instance, Green Mountain Coffee Roasters is interested in alleviating hunger and poverty in the communities in which it operates. The Timberland Company is known for its passion for volunteerism and for its efforts to reduce carbon emissions throughout its supply chain. International Paper, as you might guess, focuses on environmental sustainability.

A Historical Perspective

In 1970, when economist Milton Friedman wrote his famous New York Times Magazine piece "The Social Responsibility of Business Is to Increase Its Profits," he wasn't expressing a particularly new thought. Since the industrial revolution, American business has operated under the assumption that its job is to grow bigger, make more stuff faster and cheaper, and distribute it more widely. The glorification of financial growth doesn't leave much room for nuanced questions of sustainability and quality of life. Until recent years, the mainstream seldom questioned the idea that "more is better."

But, in fact, CSR has its roots in the early years of the republic. Initially, Americans believed it was important to limit the power of corporations and that they should exist to serve society. In the early 1800s,the American government granted corporate status only to those companies that benefited the common good-by, for instance, building bridges or canals. Around the same time, Quakers instituted a policy of refusing to invest in any company associated with slavery.

But this history is little known because the notion of the bottom line is so deeply entrenched in American society. The belief that companies should continually increase their profits has colored how we measure the performance of the companies we run, work for, and invest in, and how we measure the performance of entire economies. Most common economic measures, such as the gross domestic product (GDP), fail to account for the social ills-or the social good-that businesses create. As John Talberth, director of the Oakland, California, think tank Redefining Progress, writes in the Worldwatch Institute's 2008 State of the World Report: "It is beyond dispute.that GDP fails as a true measure of societal welfare. While it measures the economic value of consumption, GDP says nothing about overall quality of life." Talberth notes that GDP fails to measure sustainability and the depletion of natural resources-and ignores the devastation wrought by wars and natural disasters.

In their book Natural Capitalism, Paul Hawken, Amory Lovins and L. Hunter Lovins ask a question at the heart of the CSR proposition: "What destination does our society want to reach, and how will it get there?" As a worker in today's global economy, you can play a big role in charting its course.

CSR: on a Growth Curve

In 2006, Jay Whitehead founded CRO Magazine, which he envisioned serving social responsibility and sustainability leaders at for-profit companies. At the time, CRO editor Denis Schaal says, only 14 of the Fortune 1000 companies had corporate responsibility officer (CRO) positions. Two years later, that number is approaching 200, Schaal estimates. And those titled officers are, of course, a minuscule percentage of the people who actually have social responsibility duties, as evidenced by CRO's 30,000-reader circulation.

Other measures show tremendous growth in the CSR world as well. The Corporate Register, a database of CSR reports, today holds no fewer than 17,886 reports from 4,523 companies, suggesting that more corporate workers are attending to various aspects of CSR, either in dedicated positions or as part of conventional jobs. And anecdotal evidence suggests that other CSR-related positions-especially those associated with the environment-are popping up everywhere. An executive at a waste management company recently told Schaal that its large corporate customers "are establishing sustainability officers on a daily basis."

All of these numbers are just a few indicators of the explosion of interest in CSR during the past couple of years. In 2006, "green" burst through its niche walls and into mainstream culture. During the latter half of the year, it seemed like every magazine sported a green cover story. Al Gore's Oscar-winning film An Inconvenient Truth had finally moved concern about global warming to center stage; it will probably never get knocked off. Add to this oil hitting $100 a barrel for the first time ever in 2008 (and the widespread realization that it's a finite resource), then add in the transparency of the Internet, which makes it increasingly difficult to hide harmful actions, and it's easy to see why CSR is becoming an attractive concept for a growing number of companies.

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