The Standard Chartered--Fiancial Express Corporate Social Responsibility (CSR) Award will be handed over to the winners today (May 28, 2014). This will be fifth round of this award. The increasing interest of the corporate business in Bangladesh in this award and the difficult choice in selecting the winners from a large number of deserving candidates is an indication that the CSR movement in Bangladesh has come of age.
There is a long-running debate regarding business's role in society. The traditional view is aptly paraphrased by the Nobel laureate economist Milton Friedman that the "business of business is business". In other words, the sole legitimate purpose of business is to maximize profit and create shareholder value. One may also remember the famous saying of Adam Smith: businessmen never get together without conspiring against consumers.
On the other side are the proponents of corporate social responsibility (CSR), a rapidly growing global movement that argues that businesses have a responsibility to address social issues. Once a sideshow, CSR is now seen as mainstream in corporate strategy. However, the idea of CSR is still evolving and it may mean different things to different people. A vast range of activities now comes under the umbrella of CSR, spanning everything from volunteering in the local community to looking after employees' welfare, from helping the poor to saving the planet. With such a fuzzy, wide-ranging subject, many companies find it hard to know what to focus on. No wonder, beyond the corporate world, CSR is providing fertile ground for think-tanks and consultancies
The confusion surrounding the subject is also reflected in the variety of ways companies package their CSR activities. Some prefer to describe this kind of activities as "corporate responsibility", dropping the word "social" as too narrow; others call it "corporate citizenship", or "building a sustainable business", or even "how we do business". What these new labels essentially convey is that CSR is much more than corporate philanthropy. For example, smart Chief Executive Officers (CEOs) are finding that attending to the issues of ethical standards and social accountability is not just an irritating distraction thrust upon them by social pressures, but that it can help long-run business prospects as well. Social pressures often indicate unmet social needs or consumer preferences that may sometimes provide value-creating opportunities, for example, in the growing markets for healthy foods or cleaner fuels or low --priced generic drugs. Thus, CSR is increasingly being seen by companies as part of longer run business strategy.
Good businesses need to be built on public trust. Companies can be both loved and hated by the public depending on their trust-worthiness. The now-defunct oil giant, Enron, could easily claim the title of America's most hated company when it was revealed that nobody outside its boardroom quite understood what it was doing other than engaging in huge financial frauds. American public opinion about tobacco companies became sour not because of their marketing a harmful product, but when company documents were leaked to show that they had for long pretended not to know about the mounting evidence of the hazards of smoking.
Beyond outright dishonesty, there are more subtle elements in the public perception about companies. In America, the retail giant Wal-Mart has faced public hostility on the allegations of underpaying female and illegal immigrant workers and putting small local stores out of business. Microsoft is equally hated for its market power. But both Wal-Mart and Microsoft are loved at least as much as they are hated, because they offer consumers low prices and useful services. Clearly, business strategists have to tread a thin wire between such love-and-hate relationships with society.
It is generally agreed that the market economy represents an amoral and cruel system; but the problem is that, after the end of the Soviet Union, there seems to be no better alternative to it at the moment. But, good business practices can at least help to mitigate some of the sharper edges of a market economy. It is also being increasingly recognised that a mindless pursuit of financial gain need not be the only driving force behind a market economy; there can be other kinds of pursuits beyond the narrowly defined profit motive. The idea of "social business", for example, is gaining ground. The traditional mindset of "business of business is business" is giving way to the new business mantra of "doing well by doing good". Admittedly, it is not easy to reconcile these new ideas with the orthodox theories of capital markets and laws of profit maximisation, but it is happening. The future shape of global capitalism will depend largely on how these conflicts are resolved.
On the part of the governments, appropriate legislation will remain important. Most societies enact laws to protect minimum labour rights or to prevent marketing of harmful products or to reign in monopoly business power or to prevent industries from polluting the environment. In developing countries like ours, where there is a great deal of laxity in law enforcement, abiding by the law is a fundamental precondition for good, socially responsible, corporate practice
While CSR is increasingly being seen as part good business practice, the traditional role of corporate philanthropy remains important. In fact, the latter role assumes increasing importance in a low-income country like ours, where the government faces capacity and resource constraints in meeting the increasing demand for social development. A new form of social partnership needs to emerge, whereby the government, civil society organizations and the business sector can complement each other's social development effort. For this we need to create an enabling environment, including fiscal measures for encouraging private giving.
The recent episodes of near-collapse of the financial system of the industrialised West have raised questions about the moral basis and legitimacy of global capitalism and have added to the public demand for corporate responsibility. Global capitalism will need to change course in the face of popular sentiments as expressed by "Occupy Wall Street"-type of demonstrations and the concern at the intellectual level about increasing concentration of wealth as theorised by economist Thomas Piketty in his recent best-seller, The Capital in the Twenty First Century. More than two centuries ago, Rousseau's "social contract" helped to seed the idea among political leaders that they must serve the public good, lest their own legitimacy be threatened. The CEOs of today's corporate world must recognise the need and potential of a similar social contract between business and society. The contract has obligations, opportunities and mutual advantage for both sides. And only by adopting such an implicit contract, society and business will be able to work in harmony.
[Professor Wahiduddin Mahmud is chairman of the Standard Chartered - Financial Express CSR Award Committee and is currently a member of the United Nations Committee for Development
Policy, UNCDP. Email: wahiduddin.mahmud@gmail.com]
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