Problem: CSR: Two Big Questions

I. Is CSR Good Business?

The evidence is at least mildly supportive of the idea that the market rewards socially responsible performance by business. A 2009 meta-analysis of 251 studies found a "positive but small" relationship between corporate social performance and corporate financial performance.101 A 2012 study looked directly at the question of whether "high-sustainability" firms (committed to CSR) achieve better financial performance than otherwise comparable "low-sustainability" firms (committed to traditional profit seeking). The authors found that $1 invested in a high-sustainability portfolio in 1993 would have grown to $22.60 by 2010 but to only $15.40 for a low-sustainability portfolio.102 Consumers themselves have mixed sentiments about CSR with 35 percent of North American respondents and 46 percent of all global responders to a 2012 survey indicating they would pay extra for products and services from socially responsible companies.103

II. Do We Have a Better Alternative? Creating Shared Value Michael Porter, highly influential professor and corporate consultant, and others have recently been arguing for moving beyond CSR to a business model labeled creating shared value (CSV). They see creating shared value as a new form of capitalism that enhances economic competitiveness while simultaneously advancing social returns. They argue that CSR has often been treated merely as a necessary expense and a way to improve a firm's reputation. According to Porter and others, moving beyond philanthropy, good citizenship, and sustainability to integrating social value into the creation of economic value is the most effective way of achieving social progress. Nestlé, for example, strives to create shared value by making nutritious, profitable products while protecting scarce water resources and helping coffee growers secure financing and improve production. Nestlé and other shared value advocates are identifying those opportunities where social and economic value creation align, thus enabling them to achieve favorable sustainability results for communities while also making money for shareholders. Low-cost cell phones, for example, can be profitable while serving poorer populations. Shared value advocates see businesses as the most powerful institutions for social change, but they also expect those businesses to recognize that their goal must be creating shared value rather than profit per se.104

Questions

1. Construct a list of the arguments for and against social responsibility for business.

2. In a recent commentary, ethicist Chris MacDonald explained the idea that businesses must earn and maintain an unwritten "social license" to operate. That is, businesses must secure the support and goodwill of the community. MacDonald then asked what steps a business can take to maintain its "social license" to operate. Answer MacDonald's question.