"Corporate Social Responsibility: Three Words; Two Lies"

Keynote Speech of Kenneth Neil Cukier,

Tokyo Business Correspondent, The Economist

The CSR Challenge Conference; The Economist Intelligence Unit

Tokyo, December 8th 2008

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Good afternoon. Welcome to the Economist Intelligence Unit's conference on corporate social responsibility. Let me first thank Graham Davis and everyone at the EIU for the opportunity to address you today. CSR is, as you all well know, a very important topic.

However, I would insist that it is an extraordinarily misunderstood one as well. So I would like to use my time today to explain why I believe it is often simply a masquerade for companies to feel good about themselves in front of their customers, partners and employees, as well as to mislead the public.

Of course there are many companies doing great things. And we can praise what seems to be a new, generational transformation: a global spirit of our shared humanity and interconnectedness, that elevates the care for others, and the planet, into a pillar of capitalism.

The fact that you are here today and care about your company's CSR activities represents the best of the corporate word, which one can only respect. That your companies make an effort to align their commercial interests with the community interest.

Moreover, I appreciate that Japan takes social responsibility very seriously. Most corporate mission statements appeal to "service to society" -- not profits, as in the West.

Still, from my experience as a business journalist watching CSR activities unfold over the years, I cannot help but conclude that much of what passes as CSR is mainly marketing.

In some cases, the nature of the activity should not be done by businesses -- they are not the right entity to do it. In other cases, activities done under the banner of CSR actually undermines a social goal. And in the majority of cases, it is merely public relations. As one symbol of this: most company's CSR activities are run through their corporate communications department, not a dedicated team with specialist skills.

"Corporate social responsibility": three words; two lies.

Thus, I am left with deep doubts, and the critical view that much of what passes as CSR is fraudulent, certainly in respect to motives. As the 20th century, British-American poet T.S. Eliot observed: "The last temptation is the greatest treason: to do the right deed for the wrong reason."

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Let me explain my views using two examples: the shoemaker Nike, and the cigarette company British-American Tobacco.

Nike in the 1990s had a terrible reputation. Western activists accused the company of poor working conditions and paying very low wages in poor countries such as Indonesia, Vietnam and China where the shoes are made. That a pair of sneakers cost more than $100 and the workers got only a few dollars a day seemed unjust. Facing negative publicity, Nike jumped into CSR. They even issued annual CSR reports to highlight what they described as good labor practices.

The problem was that their words may not have been true. In 1998 a California resident sued Nike for misrepresenting the quality of its overseas workplace. The suit was on the grounds of "false advertising."

In one of the stupidest corporate legal defenses in the history of business, Nike's lawyers argued that the company's publicity statements should not be considered legally binding, on the grounds of free speech. Nike was in effect arguing for a company's "right to lie." (So if you thought the first newspaper headlines were bad publicity: "Nike Exploits Workers!" imagine the new ones: "Nike Goes to Court for Right to Lie!")

After losing at lower courts, Nike (unsurprisingly) stopped issuing its CSR reports! The case went all the way to America's Supreme Court, where in 2003 Nike lost and ultimately settled with the plaintiff for $1.5 million (donated to a charity monitoring workers' conditions).

My point is not with the issue of labor conditions or Nike, but a broader point: that the company's CSR was clearly aimed at misleading the public. (Nike would have defended itself against the charges if they were unfounded.)

My second example is British-American Tobacco. In a speech on November 16th 2004 in Kunming, China, the director for corporate and regulatory affairs at British American Tobacco (BAT), Michael Prideaux, admitted that the company got involved in CSR because of its low share price, because the company wasn't seen as "sustainable."

As for its specific CSR activities: two of its "core" programs were creating a website to dispel "myths" about smoking and creating a forum for dialogue among "stakeholders." In reality, a way to neuter the complaints from anti-smoking groups.

Mr Prideax boasted that BAT organized smokers into a lobbying group to counterbalance critics. It got restaurants to argue on its behalf against smoking bans. It got retailers to work on its behalf against the illegal import and resale of cigarettes to avoid stiff taxes. Keep in mind: these things just served its business, not helped the wider world. But BAT considers it CSR.

Moreover, among CSR activities cited by the company was working with retailers to prevent sales to minors, and to restrict advertising to children. But that is not "CSR" -- that is the law.

Mr Prideax concludes about CSR: "Far from being a distraction, it improves competitiveness, influences reputation and integrates important aspects of risk management."

In other words, it is about the business, not society. It's not CSR but CBR: Corporate Business Responsibility. I'm not against business -- I work for a newspaper called "The Economist," after all! But BAT's CSR is hypocritical at best, and immoral at worst.

Immoral? Let's accept for a moment one of the definitions of CSR: "doing well by doing good" -- which links the social purpose and the business interest.

Why is BAT's activities immoral? Can a company that sells something that fatally poisons people ever be seen to be doing "corporate social responsibility"? If the three words are to have any meaning, I would answer: No.

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Now, let me take a step back. Are the examples of Nike and BAT outliers from the norm? I don't think so. Most companies are not so naked in their deceit -- arguing for a "right to lie", or selling poison. But when you scratch the surface of most company's CSR activities, if one is really honest, it is all about the company rather than society.

At The Economist, we have long discussed CSR in our pages and been skeptical. In 2005 a 15-page special report by Clive Crook argued that it was usually wrong to do, done badly, or merely irresponsible self-congratulations.

CSR is wrong if it uses company assets to further a social agenda that does not bring in profits to the company -- for example, by donating to charity. "The business of business is business," is this view. Managers have no right to spend money on true CSR: it's not their money to spend, it belongs to the shareholders. They are simply fiduciary stewards.

CSR is wrong or probably done badly if it tries to remedy a social problem that is rightfully the purview of government, not the private sector. For example, pollution controls sound like a good idea, but it might make more sense that government regulate this, than ask for business to develop standards as part of a CSR policy.

CSR is unnecessary self-congratulations if it advances the company's interests, such as enhancing the firm's reputation. In such cases, it is something the business should probably be doing anyway. Calling it CSR just dresses it up.

For example, if an electronics company trumpets that it is moving into solar power cells and considers it CSR, they are deluding themselves: it is a business strategy. Likewise, if a toy company boasts that its CSR activities include eliminating toxic materials from their products, let's not call that CSR or give them extra credit: they should be doing these things anyway.

In January this year Daniel Franklin, the newspaper's executive editor, wrote another 15-page special report on CSR. His conclusions built on these points. He argued that CSR -- to the extent it is going to happen -- is sometimes just packaging what the company is going to do anyway. More ambitious activities are sometimes done badly because firms do not pay enough attention to evaluating their activities, he argued. Still, he acknowledged that companies need to be doing something, because consumers and employees expect this.

Actually, this might be a good sign of the times: that CSR activities have become so internalized into the operations of companies that they are taken for granted, and seem odd when they are not there. Companies are not like you and I: with the volition to make decisions based on subjective discrimination. It needs to follow a "play book" -- and CSR, like accounting standards, is becoming the rulebook for corporate ethics in its operations and in the community.

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So far, I've only criticized. Let me try to be constructive as well. What would honorable CSR look like?

First, get rid of the Orwellian term. In his essay "Politics and the English Language" in 1945, George Orwell wrote: "In our time, political speech and writing are largely the defence of the indefensible." For example, we know that words like "democracy" are good and "dictatorship" is bad. So of course every authoritarian regime calls itself the "People's Republic" of this or that -- using language to hid the true meaning. I realize I am fighting a lost battle asking companies to stop using "CSR". But let us at least agree to recognize the term for what it is: sanctimonious.

Second, companies should never tout as "CSR" -- see, I cannot help but use the term! -- things that are part of what it does anyway. That is just packaging for public relations.

Third, if CSR is truly genuine, it should learn from the approach to charity followed by many religions and practice CSR without calling attention to oneself -- simply because it is the right thing to do, not because of what one will gain in return.

The extreme version of this is for a company to do a CSR activity that is actually harmful to its interests, but does it anyway and does not promote it. That of course is what personal charity usually is.

You can be relieved that this is not what I am advocating. A business has to be a business, and there are practical limitations on what it can and should do.

But let us at least be honest with ourselves, and realize that companies should do the right thing because it is the right thing. That should be common sense. Dressing it up as "corporate social responsibility" is false virtue.

Ultimately, often underpinning the idea of CSR is a belief that the nature of business is evil; that making a profit is inherently corrupt or dirty. And that CSR is needed to counterbalance or cleanse the activity, much as Christian baptisms erase original sin or Shinto purification rituals.

This is preposterous. The very act of being a sustainable business is itself a socially beneficial thing. For example, if one is a bank, one benefits society by making loans -- as we are especially aware in the ongoing credit crunch. Likewise, any business that meets a need in the market is performing a service to society (perhaps with the small exception of cigarette companies!)

Business leaders might want to keep this in mind, as they approach CSR with a bit more introspection and honesty. Thank you.

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