Can Corporate Social Responsibility Save Capitalism ?

To quote one of my favourite songs: “All natural and technological processes proceed in such a way that the availability of the remaining energy decreases. In all energy exchanges if no energy enters or leaves an isolated system the entropy of that system increases.  The energy continuously flows from being concentrated to becoming  dispersed, spread out, wasted and useless. New energy cannot be created and high grade energy are being destroyed. An economy based on endless growth is unsustainable.”

By adapting the 2nd law of thermodynamics to our economic system MUSE seems to warn us about how in a society led by consumerism, mankind seems to have started a race which could end  with its annihilation. With all that we have learned about the impact of global warming on our environment it would be wrong to dismiss this out of hand. To avoid such a result, disparate voices have offered a variety of alternate methods.  Whereas some promote a society free of capitalist thoughts, such as the de-growth movement, others still think the very DNA of capitalism could be transformed to embrace environmentalism. This branch of thought has led to the rise of Corporate Social Responsibility (CSR). 

There are a variety of definitions for that concept most of which imply that companies adopt a socially responsible attitude in their business model. This means that companies should take environmental and human rights issues into account when setting their business policy. That theory was first transcribed into “soft law” meaning that any regulation proposed would not be legally binding. Consequently, NGOs and supranational institutions such as the OECD and the UN met with big corporations to set out guidelines for them to apply to their business relationships. 

Now though, there are debates within countries as to whether they should create legally binding CSR rules.  In fact, there already are some CSR inspired statutes in different countries. France would be one of those which have taken the earliest steps towards that path. As of this year French corporations over 5 000 employees should put a sustainability policy into their yearly reports that their subsidiaries should follow. By doing so France is trying to limit the social impact of its companies around the world. 

 Furthermore this has influenced our very notion of business. Some countries are rethinking the very definition of what a company should be. As an example, this year UK reformed its corporate governance code stating that a company should generate” values for its shareholders” and “contribute to wider society”. The second part of that statement could mean that companies should take the future into account. 

The question is whether those supposed changes would be enough to modify the core of our economic structure so that it becomes sustainable.  Since the very beginning of CSR critics have consistently submitted that such policies would only result in companies “greenwashing” themselves, by drawing attention to minor positive changes whilst continuing with policies that do major environmental damage… 

Another question is how effective the law is in policing the social impacts of companies ? Indeed this could result in  “cat and mouse” situations where companies would try to circumvent those rules. In regards to this issue, new ways to regulate have been suggested. Some have already  been put in place and have a long history. As a matter of fact, because only a select few countries have actually implemented such laws, not-for-profit organisations have already used their own influence to put pressure on companies to reduce their negative impact. Using “name and shame” tactics, they have forced many companies into unwinnable PR battles, over issues such as fur coats and whaling. In addition to the extra-judicial strategies, NGOs have used legislation against misleading advertising to force behavioural changes on the part of these corporations; for instance, in Nike vs Kasky (a Californian case), it was claimed that Nike had worked with factories that employed children, and when Nike responded denying this claim, they were sued by a customer. The court concluded that this response constituted advertising, which is not protected speech, and so Nike could be sued – this has meant corporations have had to be more cautious about appeasing sensibilities in regards to those sensitive issues.

Despite being well-intentioned, these strategies could be subverted; companies hire PR advisors and spend millions on advertising, and so any controversies can be swept under the rug, and positive actions emphasised in the public eye. Additionally, the modern news cycle is constantly updating, and any seriously negative press will often be largely forgotten in the near future.

This does not mean we should abandon CSR, however; in fact, it means precisely the opposite. We must fully embrace CSR legislation, in order not only to restrict companies’ abilities to harm the environment and human rights in a legal sense, but also to ensure that these issues remain in the public consciousness long enough to force them pressuring the market and companies towards sustainability.

This article was written by Daniel Alves, with contributions from Benjamin Morris and Giselle Vega.