COMMITMENT to Corporate Social Responsibility (CSR) has now become commonplace in the corporate world. Practically every formally organized business establishment mentions CSR in its vision statement. The degree of commitment varies among business firms, ranging from mere lip service to being fully committed to serving the needs of society in some way or another.
Most consider their social initiatives as their way of sharing economic wealth with the less fortunate elements of the community. Many have adopted measures aimed at minimizing damage to the environment.
Few, however, have fully integrated their CSR initiatives into their overall strategic plans and business models. PLDT?s Manny V. Pangilinan earlier talked about ?strategic CSR,? and most recently, the Ayala Group has announced its plans to adopt ?? a new way of doing business that puts sustainability above profit-making.?
By and large, however, the concept remains muddled in the minds of even the most fervent advocates of CSR. Most still consider it as a form of giving and as a means of sharing with society the cost of managing the environment, alleviating poverty, and educating the young. To many, these initiatives entail a need to forego some profit.
An alternative view
From different and more time-honored perspective, corporate social responsibility is a contradiction in terms. In capitalistic economies like ours, so the argument goes, the SOLE responsibility of business firms is to create economic value for their owners?that is, to generate profits. Apart from this institutionally mandated role, business corporations do NOT have any other responsibility to society.
Moreover, as social institutions, business firms are not subject to the same ethical norms as individual members of society are ?including corporate CEOs and board members! Berkshire Hathaway pursued its strategic goals relentlessly, and the results show for themselves. What Warren Buffett does with his life?and the wealth he has accumulated?is entirely up to him.
PLDT and the Ayala Group of Companies will be judged by the usual measures of financial success. Manny V. Pangilinan and the Zobel de Ayalas?and the other men and women who own and manage their enterprises?will be judged by the benefits they bestow on, and the harm they cause to their fellow human beings.
Just as the Church is blameless for the behavior of errant priests, so are business corporations morally insulated from the actuations of the individuals who own them, manage them, or patronize them.
Most of the socially beneficial initiatives undertaken by business organizations are being implemented NOT because they are socially beneficial, but because they are in their long-run strategic interest.
Toyota is building hybrid cars and developing battery-powered vehicles NOT because they are environment-friendly but because that?s where the money is! In a sudden change of heart, Exxon Mobil ("We are in the oil business.?) is researching on alternative sources of energy for exactly the same reason.
By joining hands in providing financing services to small businesses in the country?s outlying areas, Globe and BPI are tapping into a huge potential revenue source, a legitimate corporate goal, while at the same time creating economic opportunities in the rural communities.
Choice criteria
While business firms as social institutions are not bound by ethical norms, they are subject to strict rationality norms. Their choices are expected to yield optimal results?that is, the highest possible contribution to shareholder value.
To achieve optimality, corporate decision makers must have ONLY ONE objective. They must apply ONLY ONE choice criterion?to maximize contribution to profit. If managers are to be constrained by other goals such as minimizing carbon emissions or reducing the level of poverty in their communities, their ability to achieve optimality is likely to be compromised.
This is not to say that business firms should not undertake socially beneficial projects. However, it must first be shown how pursuing social and environmental goals will impact on profit, and that doing so in specific ways will actually enhance profits.
If corporate managers are to be guided by the ?profit imperative,? then the now generally accepted triple-bottom-line (3BL) accounting principle must be seriously rethought.
3BL all but ignores the high degree of synergistic interconnectedness among the humanitarian, environmental and financial entries in the three statements. To maximize economic value, social, ecological and financial transactions should not be treated separately. The entire set of interrelated issues must be viewed holistically because they affect and are affected by a dynamic and complex ecosystem in which the firm is inextricably embedded, and within which it must survive.
The challenge
Corporations must pursue their CSR initiatives as a means of fulfilling their mandate of maximizing shareholder value over the long haul. To achieve this, they should selectively develop products and services, and serve specific market niches that leverage their special resource endowments and knowledge capabilities.
In this way, the unrelenting pursuit of profits will ensure the maximization of the firm?s contribution to social value.
Considering that today?s consumers, investors, governments and the various segments of society are beginning to be deeply concerned with social and environmental issues, and are bound to patronize like-minded business establishments, corporate managers need not be conscience stricken to be socially responsible. They only have to be market driven!
(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is Vice Chair of the MAP Publications and Advocacy Research Committee, an active academic and a knowledge management consultant. Feedback at map@globelines.com.ph. For previous articles, please visit .)
