As we head towards the end of the year, some companies are more willing to donate and sponsor events to ensure their budgets are well utilized.
However, I want to unpack whether Corporate Social Responsibility (CSR) really contributes to business success or is it simply a good feel/ good will exercise.
In short, CSR is a business’s way of giving back in the form of a donation or sponsorships, to the community in which it operates.
However, Milton Friedman (one of the founding fathers of CSR theories) “criticized” the use of corporate funds to handle societal problems.
Friedman had no issue with executives using their own funds for philanthropic purposes; however, Friedman was concerned that the bearers of the risk of CSR are the shareholders and not the executives, which should not be the case.
He believes that the interests of the business must be aligned to shareholder interests. Shareholders want their investments back quickly. So, executives need to make decisions that align with those interests.
Friedman further argued that CSR activities implemented by businesses distort economic freedom, because shareholders are not always given the opportunity to decide how their money will be spent.
He further held that the companies’ only responsibility was to maximize their owners’ and shareholders’ wealth.
Do you agree with Friedman theories?
CSR by nature uses business profits to fund projects. These projects do not always improve the business, apart from creating goodwill within the community.
Their agenda is mostly focused on either social or environmental factors, but not necessarily on the triple bottom-line strategy of the business. Therefore, recent studies advocate that CSR initiatives need to be part of the larger sustainable framework and more connected to the overall business strategy.
CSR activities need to create long-term shareholder value and manage risks that are derived from economic, environmental, and social developments.
The CSR initiatives must also positively impact the supply chain level, to ensure for example, a company does not use child labour to produce its products.
So where does Sustainability/ESG developments fit in?
An organisation that has a sustainability framework embedded in its corporate strategy, has initiatives that cut across the supply chain, as well as its core functions.
These initiatives rely on deep analytics, strong stakeholder engagement, great understanding of the business’s future, good governance and long-term strategies that create both value for the shareholders and the community.
CSR initiatives thus need to stop operating in silos, and start being fully integrated into the overall business strategy.
Therefore, recent studies are referring to CSR 2.0.
CSR2.0 is linked to improvements in economic performance, operational efficiency, higher quality, innovation and competitiveness.
At the same time, it raises awareness on responsible behaviors, as businesses are capable of being socially and environmentally responsible ‘citizens’, whilst pursuing their profit-making activities.
Morna Ikosa is a Senior Corporate Communications and Brand Reputation Strategist, CPRP,MA, AKA Fixer. If you want to connect, send me a shout out at micommunicationscc@gmail.com or find me on LinkedIn.
