Socially responsible corporations

In a recent news article I read that 2024 was the first year to pass the 1.5°C global warming limit (vs the pre-industrial age). We, as a society, are not doing enough to defuse this planetary timebomb. This is a shared responsibility among individuals, governments and organizations. Global corporations, by their size, reach and weight, play a relevant role in this common quest by leading and acting in a socially responsible way.

What is CSR?

Corporate Social Responsibility (CSR) is a somewhat voluntary form of corporate self-regulation that aims to contribute to sustainable business development by addressing environmental, social and economic issues.

Developed in close alignment with UN's 17 sustainable development goals, CSR policies define the commitments to ethical practices, sustainability, and its responsibility towards society and the environment. It provides a framework for how a company will manage its operations, stakeholder relationships, and long-term impact in ways that are socially, environmentally, and economically responsible.

An impactful CSR policy goes beyond the mandatory compliance with local laws and regulations. It demonstrates how the organisation behaves "when no one is watching". It’s a public statement of the values and principles that govern the corporation decisions.

The environment

The natural mechanisms that control the ecosystem enabling life in the planet have demonstrated a good resilience to disruptive events for centuries. But the level of exploration and consumption of finite, non-renewable, planetary resources from the last century is staggering. The impact on the ecosystem is evident and the capability of those natural mechanisms to mitigate it are beginning to show their limits. A dramatic feedback loop could power an acceleration of the environmental impacts, unless urgent action is taken.

The Society

Corporations thrive when the people they serve thrive. This includes employees, customers, partners and the society as a whole. To enable this goal, corporations should:

• Advocate for the elimination of slavery, child labour, and the denial of human rights - fortunately, these are illegal practices in most places.
• Comply with relevant health and safety regulations and labour rights - as a license to operate
• Invest in education, culture, skills-building, community development, and fostering a diverse, equitable and inclusive society - as higher social goals

The Economy

For-profit corporations' survival depends on their financial results. To guarantee long-term perspectives of growth and financial performance, corporations need to:

• Implement sustainable business processes, not subject to infinite resource availability or dependent on unethical sourcing of material or services
• Manage reputation and brand value risks across the entire value chain with transparency and accountability.
• Ensure capital and regulatory support from investors, governments and advocacy groups

It is clear that having and communicating their CSR commitments is a good business practice for corporations and when widely adopted, the results will contribute to their success and the positive causes therein defined.

So all is good, right?

Well, after a period of great focus and growth of CSR awareness in the 2nd half of the last decade, the recent trends are showing a slowdown, if not a reversal in many of the CSR pledges. Unilever, a CSR champion under the helm of Paul Polman (I invite you to read "Net Positive"), has recently diluted their social commitments. More organizations are following similar paths. Trade on global sustainable investment funds have stagnated globally, and are in reverse in the US, showing investors' growing scepticism towards the CSR causes. Amazon, Walmart and McDonalds are winding down their DEI (Diversity, Equity and Inclusion) initiatives and JPMorgan Chase and BlackRock, have pulled out of groups focused on risks from climate change.

Policy and (mis)information

As the CSR awareness and adoption grew and capital flows changed to encompass the new trends, some interest groups were left on the losing side. Those who agree that the ultimate goal of corporations is to satisfy the financial expectations of their shareholders - as Milton Friedman advocated in the 70s article "The Social Responsibility of Business is to Increase its Profits" - defend that CSR is a distraction and a "robbery" of shareholders' money.

Disinformation and misinformation campaigns aimed at governments and the general population and, supported by well-funded and well-organized interest groups, initiated a reversal of public opinion towards CSR principles.

This reversal was adopted at different extents by parties from a wide political spectrum as a means to attract voters and drive a policy agenda away from the CSR principles. Statements frequently referred it to be naïve, detached from reality and the realm of "woke-minded liberals" and their agenda. CSR became a by-word for principled activism, the stuff of the top levels of Maslow's hierarchy of needs that does not resonate with the general population. Economic constraints, geopolitical tensions and social polarisation further enhanced the sense that CSR a distraction and a financial burden to individuals, when cost of living and the satisfaction of human's basic needs are at risk. Curiously, the instigators of these views, are mostly well-off.

The (un)clarity of the message

CSR somehow embraced all corporate positive development causes under a single policy umbrella. In the attempt to communicate the principles to everyone (investors, consumers, governments), the corporate message became somehow diluted and agreement with all its principles became harder for those it was targeting.

Like in product development and marketing, the value communication should focus in less, more relevant aspects (see the Kano model) than listing the complete set of product features.

While trying to become all-encompassing, CSR corporate advocacy became an easy prey for disinformation, populist and denialism campaigns that seized upon a large set of topics to pick on from, intentionally misinterpreting the CSR principles in the pretence of defending traditional values, freedom of speech or economic independency.

What now?

It is possible to consider that CSR went somehow too far and now we're witnessing the backlash that will ebb and flow until the right balance is found. But some of the UN development targets are more urgent and pressing than others. Any delay or distraction in the quest to prevent global climate change will likely become irreversible if urgent action is not taken now. Business and corporations will only exist on a liveable planet and I believe climate change should become a policy on its own. This doesn't mean the other causes are less important; just that climate change is an existential threat for the planet. Are we all ignoring the astronomers from the "Don't look up" movie?

Arguably, addressing climate change is a task for governments and requires international agreements and cooperation. Given the actual conjuncture, and the policy choices from some of the main climate change contributing nations, I'm afraid the hope can be better placed on large global corporations to take the lead in this joint challenge.

How will corporations navigate the current CSR trends? Assume leadership and commit to the triple bottom line (Profit, People and Planet) or should they prioritise the financial results in the short term and wait for shifts in policy and public opinion to adapt course? And, can Europe remain the flag-bearer of sustainable, ethical and resilient innovation in a more polarised, inward-looking global business landscape?