CSR – Corporate Social Responsibility – refers to the idea that to earn a ‘social license’ to operate, corporations must fulfil a range of social obligations beyond their traditional profit-making role. This involves considering the social impacts of company activities on the interests of non-shareholder stakeholders in the community
The key message – or rather warning – of my book, Corporate Virtue Signalling: How To Stop Big Business From Meddling in Politics, is that CSR is in danger of becoming a rubric to justify political meddling by companies in social debates that have little if any connection to the true business of business.
Within the corporate landscape there an influential and strategically-placed CSR ‘industry’ pushing companies to do more and more CSR.
The CSR professionals who occupy HR, people and culture, and corporate affairs divisions, and who operate inside the major consultancy firms, have an activist mindset.
Their ultimate ambition is to subvert the role of companies into political players campaigning for ‘systemic change’ behind ‘progressive’ social, environmental, and economic causes under the banner of CSR.
The influence of the ‘industry’ on business thought and practice at the highest levels has been clearly evident in the direction business has headed this year.
BHP and Rio Tinto have become the first companies to support indigenous Constitutional Recognition. A group of leading company directors have also formed a new pressure group to encourage business to take the lead on the Republic.
These developments underline the serious implications for the role of public companies and for Australian business in general: if the proponents of CSR get their way, the kind of political involvement by business that we saw in the same sex marriage debate, will prove to be just the tip of the political meddling by companies.
CSR is therefore threatening to fundamentally politicise the role of companies, and politicise their brands and reputations.
The significant transformation of the role of business – which would see shareholders money routinely used to engage in open political activism – and the risks that this entails for companies, are not sufficiently considered in the debate about CSR in business circles, mainly because the debate is dominated by those who are part of the ‘industry’.
However, the solution to these problems does not lie is taking a simplistic approach that generates more heat than light, as adopted in much critical commentary that has accused companies of being taken over by politically correct ‘corporate lefties’.
There is a legitimate business case for some CSR activities, given the realities and complexities of the modern business and cultural environment in which companies operate.
CSR is legitimate when it involves, as a matter of good commercial judgement, managing social risks and stakeholder interests for the sake of the best interests of shareholders and the long-term financial wellbeing of companies.
However, the legitimate ‘business case’ for CSR also draws attention to where CSR crosses the line into inappropriate politicking – which is the point at which the activists seek a license to play politics with shareholders money on issues that have little, if any, relevance to shareholders interests.
If the influence of the ‘industry’ on the CSR direction of business is to be curbed, corporate leaders must become more aware of the ‘business risks’ of CSR with respect to politicising company brands and reputations.
The reputational and branding arguments for CSR must be turned around to make the case against CSR by making an obvious – but rarely stated – point.
Corporate involvement in divisive social questions on which there is no community consensus among shareholders, stakeholders, employees and customers, can have negative brand consequences for companies that acquire reputations for being ‘being political’, particularly at a time of growing social, cultural and political polarisation in society.
But even if awareness of the downside of CSR fosters increases, what precisely can corporate leaders who want to take a more hard headed business based approach actually do to counter the well-established doctrines, structures and momentum of the CSR industry that is institutionalised across business?
The solution is to introduce into the language and practice of corporate governance a new clarifying principle to overtly qualify existing CSR philosophies – the Community Pluralism Principle – which would read:
It is important for modern corporations to consider their impact on all genuine stakeholders in the best interests of shareholders. It is also important that engagement on social issues cannot be perceived to distract from company’s core business mission, duties, and accountabilities, nor negatively affect its brand and reputation in the market of opinion in a political sense. It is a matter for boards of directors and other corporate decision-makers to manage these risks by ensuring that companies respect and reflect the pluralism of Australian society and remain open to the views and values of all employees, customers, shareholders and stakeholders across the community.
The ‘pluralism principle’ expressly flags the need and importance for companies to manage the business risks of politicisation and rule out any involvement in ‘systemic change’.
If it was inserted to ASX’s Corporate Governance Principles this new requirement for companies to respect the pluralism — the different views and values — of the community would hold company directors and other decision-makers accountable for ensuring CSR doesn’t escalate into political meddling.
The pluralism principle would greatly assist those working in companies who might wish to push back against the CSR trend, and in the inevitable internal management struggle over the CSR direction of the company.
A counter institutional framework and set of ground rules like the pluralism principle to explain decision making around CSR means that those who want to push back won’t have to fight on the merits of particular issues – with all the professional and social risks of being seen as un-‘progressive’.
Instead, they would be able to refer to the need to ensure companies remain non-political as a general principle, and to therefore ensure companies avoid getting involved with an issue that is ‘political’ – with political being a boo word – in order to uphold its requirements as per the pluralism principle.
Dr Jeremy Sammut is a Senior Research Fellow at The Centre for Independent Studies. Corporate Virtue Signalling: How To Stop Big Business From Meddling in Politics is published by Connor Court and available now, www.connorcourtpublishing.com.au.