Can CSR survive the recession?

Corporate Social Responsibility (CSR) covers a wide range of philanthropic activities. From labour relations and human rights in outsourced countries, to environmental sustainability and voluntary work carried out by employees. The corporate world is under increasing pressure, from both consumers and the government, to act responsibly in all areas of its business. Many businesses have now taken up this challenge, but can CSR survive the current economic crisis?

Against many predictions, CSR appears to not only be surviving the recession, but also flourishing within it. On May 11, 2009, the Gangmasters Licensing Authority (GLA) announced it would be working with the major UK supermarkets to help fight labour exploitation. Mars have also followed Cadbury by declaring that its entire cocoa supply will be sustainably produced by 2020.

The development of CSR is also producing jobs at a time when many companies are shedding staff. During May, the multinational software company SAP announced the creation of a new role of Chief Sustainability Officer. Intel have also recently created a Vice President of Sustainability, and PGI, (a medical and industrial manufacturer), have also created a similar role.

There is plenty of evidence that many areas of CSR are gaining ground, despite the economic gloom. But why?

At face value, during times of financial stress CSR is one of the areas of the business more vulnerable to cut backs. What company can afford to give away cash and resource in this day and age? However, there are many reasons why it may be a question of what company can’t afford to.

If CSR isn’t part of a core brand image, then it may appear that it is an easy area in which to cut back. However, the media are hungry for stories of cash strapped companies cutting back on good works to save themselves. The perception of your company from the stakeholder and consumer perspectives may be shaken if you begin to withdraw funding from CSR initiatives.

Your company needs to be seen as ‘solid’ and transparent if stakeholders and consumers are to maintain trust. The public is nervous, and any action that can be seen as a sign that your company is in trouble may well produce undesirable knock-on effects. One way around this, for example, could be to donate a % of profits to a CSR activity rather than a specific amount. That way, if the profits go down you don’t need to find the extra capital, but from a media perspective you haven’t changed or withdrawn any funding.

It is possible to be profitable and ethical at the same time. For example, rising energy costs provide an opportunity for greener options to become more economically viable. Using webcams instead of air travel reduces costs and carbon footprint. Reducing packaging, as some Easter egg manufacturers did this year, not only saved money but also presented the manufacturers in a more positive light. Some innovative thinking may be required to find the options that serve both profit and ethics equally, but they are worth pursuing.

It’s also worth remembering that in the grand scheme of things, the recession is only here for a relatively short space of time. Once recovery begins, your company will be able to herald the fact that it kept it’s CSR initiatives going even when times were tough. This presents the company in a good light, not only for consumers and stakeholders, but also for recruiting new talent once the recession has receded.

In the long term, by investing in emerging markets now, you could prevent a crisis in the future. Assisting poorer countries, such as Asia, to become more economically sustainable can stabilise the global economy, and also builds a new customer base for the future. For example, the Grameen Danone Foods programme. Launched in March 2006, this project uses a community based business model to being daily nutrition to deprived areas of Bangladesh. It uses low capital intensity manufacturing options to produce a low cost dairy product, and then reinvests over the levels of that initial capital.

The label ‘CSR’ covers such a wide range of activities that it may be a little naïve to believe all CSR is flourishing. For example, voluntary work undertaken by employees may well reduce if staff are having to work longer hours to find second jobs to pay the mortgage. However, the face of CSR may adapt and change, but overall it will survive.

Research has found that corporate charity work is normally based on a long-term profit motivation, (Navarro, 1988) and this is probably why it’s flourishing in the recession. The profit motivation behind CSR programs may not seem entirely philanthropic or to reflect the true spirit of CSR, however, profit has to matter.

A profitable CSR activity is much more likely to remain while CEOs come and go. A ‘pet project’ is more likely to be shelved during personnel changes than a profitable activity. A CSR project that can add to the bottom line is more stable and therefore more likely to help more people in the long run.

If a philanthropic company doesn’t survive the recession, it’s not going to be able to help anyone. Like a mother on a failing aeroplane being told to put her oxygen mask on before that of her child’s, a company has to be in a strong position to be able to help others.

Sally Pearce, June 2009


References:
Navarro, P (1988). Why do corporations give to charity? Journal of Business 61.1, 65-93.

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