While researching ExxonMobil I stumbled over an interesting story.
On March 24 1989 the Exxon Valdez, on oil tanker crashed spilling 260,000 to 750,000 barrels of crude oil into the Gulf of Alaska. Up until the Deepwater Horizon oil spill in 2010 this was the largest one to ever happen in U.S. waters. Exxon thereafter not only tried to downplay the severity of this spill but also responded infuriatingly slow to cleaning up the disaster.
How do companies that are responsible for such catastrophes like Exxon or BP manage to keep the support of the public?
What about their Corporate Social Responsibility?!
Rose one of our fellow Bloggers wrote a great post explaining the concept of CSR and Greenwashing “Do you want to find the answer to all world problems?”.
On CSR Globe ExxonMobil offer their view on CSR
“Every business decision reflects the company’s commitment to corporate citizenship. The company firmly believes that the way it achieves results is as important as the results themselves. To that end, the company will continue to apply its expertise and resources to the daily challenge of providing energy to the world in an economically, environmentally, and socially responsible manner.”
But does an oil spill of up to 750,000 barrels sound responsible to you?
Reading Mirella’s post about Exxon’s extensive Lobbying, manipulating of the public and talking to our professor Dr. B I got to thinking.
What is the true value of CSR?
Is CSR really just a management and marketing tool?
Opinions on this question vary immensely.
Milton Friedman, an American economist and recipient of the Novel Memorial Prize in Economic Sciences criticized CSR programs in his article the New York Times “The Social Responsibility of Businesses is to Increase its Profits,” Sept.13, 1970.
“The key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them…..If these are ‘social responsibilities,’ they are the social responsibilities of individuals, not of business “
He even goes so far as to proposing that by giving in to the myth of Corporate Social Responsibility, free businesses in a free market will in the long run seize to exist.
“This may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces. “
On the other hand Dr. Doug Guthrie, Dean, Professor of International Business and Professor of Management at the George Washington University School of Business, finds
“CSR is an institutionalized way of maintaining community legitimacy, chiefly in the face of pressures from labor unions.”
In the book “Communities, Labor, and the Law: The Rise of Corporate Social Responsibility in the United States,” he and his co-author Justin I. Miller argue that CSR was implemented by businesses themselves as a reaction of pressure from outside communities, especially labor unions and to prevent them from getting too powerful. He implies that CSR ultimately let to the decline of labor Unions.
“CSR was an effective response to restive labor, coming at key points in history where corporation needed to reverse labor’s rising power and stave off government regulation.”
Guthrie justifies this statement by following the history of CSR and linking it’s development, and rise to the the history of labor unions. Check out his article in Forbes magazine for full details.
Another argument which supports this thesis is that the CSR strategy of an enterprise is neither set nor easily verified by governments or society.
Every organization decides for itself if and how they want to implement a CSR strategy. CSR is not accurately monitored by an outside source.
For example Exxon lists these points as the control of CSR
- internal auditors
- industry guidelines
- social and environmental impact assessments
- quality assurance agencies
No real verification or justification is needed.
That is why critics of current CSR methods demand more transparency and more accountability.
“.. the business class, often misinformed by press agents and PR managers, is more likely to pass the buck to save a few bucks. Yet being transparent and proactive is probably what would really give CSR teeth.”
“Finally, CSR should not just be in the hands of corporations.”
Of a completely different opinion is Bob Lutz author of “Guts:The Seven Laws of Business That Made Chrysler The World’s Hottest Car Company” and, more recently, “Car Guys vs. Bean Counters: The Battle For The Soul Of American Business”. His argumentation is more in line with Milton Freeman’s. In his eyes CSR is a hazard. Contrary to what people tend to believe he insists that it’s not only harmful to business but also to society.
“Reducing operating profit by giving away the shareholders’ rightful gain to social causes is morally wrong ,…, won’t provide the largest benefit to society, and should not be taught in business schools. “
After reading this statement I wondered about its degree of truthfulness. Is not another wildly claimed benefit of CSR that it in the end “pays” for the companies to be active?
David Vogel, a professor at the Haas School of Business at the University of California, Berkeley and author of The Market for Virtue: The Potential and Limits of Corporate Social Responsibility, points out
“The evidence for these rewards and punishment is rather weak.” … ” For most firms, most of the time, CSR is largely irrelevant to their financial performance.”
This came as a huge shock to me but when reading his examples I could not help but agree. He listed Starbucks, which enjoys a strong CSR reputation due to “its generous labor policies and its commitment to improve the earnings and environmental practices of coffee growers in developing countries.”
Yet since the beginning of 2008, its shares have recently declined nearly 50%!
“This disappointing performance has absolutely nothing to do with CSR: It is entirely due to the firm’s overexpansion and, most recently, the increasing unwillingness of consumers to pay as much for a cup of coffee as for a gallon of gasoline. “
Another example for the neglecting importance of CSR in financial terms is ExxonMobil. Even though it has one of the worst environmental reputations, check out Lilly’s post if you want to know more about this topic, which usually is a key aspect of CSR it was voted the world’s most profitable company this year by Forbes. BP one of its rivals with a far more extensive CSR strategy was only ranked eleventh.
This came as a huge shock to me had I always believed in the benefits of CSR to an organization.
In the end discovering the value of CSR not only to businesses but also society is not an easy task to fulfil. But then another thought occurred to me.
Maybe it will be our generation who will be able to bring real value to CSR!
Taking responsibility and giving CSR meaning is, in the end, not only up to managers but just as much to consumers. We have to become more aware and alert regarding what we buy. If businesses really do only react on pressure from outside the consumers are the force needed to start and develop CSR to something truly important.
So maybe it is us now who have the opportunity to generate a real value for CSR.
And as consumers as well as managers in the making aren’t we the strongest force yet?