(2017-8) The (failing) promise of CSR to deliver development

By Mirjam Rennit, Melanie Spear, Madeleine Trentesaux, Claudiu Nicolae Toader, Annabel McCosker

In an increasingly globalized world, trans-national corporations are present everywhere, their activities having a significant and often detrimental effect on the local communities. As such, corporations often engage in practices of corporate social responsibility (CSR) in an attempt to remedy such consequences and also potentially aid in the development of said local community. With this context in mind, this essay will explore the potential of CSR for providing meaningful change and how CSR interacts with development in the local socio-political climate.

Moura-Leite’s (2011) account provides context for the history and evolution of the concept of CSR. Far from being new, we can find academic discussions of the alleged responsibility that businesses have towards society dating back to the 1920s. However, the meaning and modus-operandi of CSR has changed significantly over the years. Up until the 1980s, CSR was conceptualized exclusively in terms of acts of philanthropy and paying employees a fair wage. Crucially, however, the concept was unrelated to performance, but rather, seen as an intrinsic necessity derived from an ethical responsibility towards society, an idea that was challenged by some scholars on the right (see Friedman, 1962). This changed after the 1980s when CSR started to be connected to potential benefits for the corporation in terms of improving external perceptions or securing a stable work environment in the local communities. As such, CSR evolved from an ethically-orientated practice to a performance-orientated one. Furthermore, due in part to increasing institutional pressure, CSR is now the norm for most corporations. Nearly 90% of companies in the Times Fortune 500 embraced CSR as an essential component in their annual reports in 1990.

With the increased presence of CSR and corporations, it is therefore important to critically asses the transformative potential of CSR. Is it fulfilling the purpose of providing development to the local communities or is it simply an attempt by corporations to better their standing with the communities and authorities?

The more critical accounts of CSR argue that it is not an effective means of achieving development. Blowfield (2005) argues that CSR is a means for corporations to reach new markets and to promote a particular view of society, one in which business is the way to alleviate poverty. Development has been traditionally conceptualized as being the responsibility of the local authorities and the supporting NGOs. The paradigm within which CSR operates is one in which these responsibilities can be taken up by corporations, hence diverting attention from the inability or often downright corruption of the local authorities in providing the services necessary for the local community (Frynas, 2005). Corporations might rebut this argument by claiming a degree of political-neutrality and their inability to interfere with governance failures. However, this argument denies the reality that companies already intervene in politics by lobbying or benefiting from the non-enforcement of certain governmental regulations.

However, one could then argue that there is nothing intrinsically wrong with shifting this responsibility as long as the local community benefits. We would however argue that this view is flawed, as corporations are not well-suited for providing long-term development. Due to their performance-orientated self-interest, corporations will most likely favour tackling issues that would benefit them (Moura-Leite 2011), therefore excluding the issues that serve no perceived benefit for the corporation but that would otherwise be relevant to the local community. Furthermore, this orientation also means that corporations more often than not target short-term issues. Expertise is also an issue that needs considering. Corporations often lack the understanding of the local context and priorities of the local community. Development is not ‘’one size fits all’’, therefore an effective plan for long-term development needs to take into account the local socio-political context (Gilberthorpe and Banks, 2011).

Gilberthorpe and Banks’ (2011) case study of CSR in Papua New Guinea shows how a corporate oil project disproportionately allocated cash royalties to one of the ethno-linguistic groups in the area most affected by the industry. The result was an increase in antagonism between various groups and a more rigid approach to kinship boundaries in order to attract corporate compensation. As such, we can see how the performance-oriented approach to CSR often divides local communities into ‘’haves’’ and ‘’have-nots’’ and has detrimental effect on relations between people that maintain social and economic security.

It is however important to note that not all academic accounts are as critical of CSR. Sharp (2006) argues that corporations are obliged to aid those who possess something of value to the business, hence providing a legal and moral justification as to why certain communities are entitled to development and other are not. However, these groups and their relative ‘’usefulness’’ to the corporation are not fixed in time, but are subject to change, and as such, the groups that do not gain privilege from CSR today might be seen as useful for the corporation in the future. Furthermore, as the responsibility for development shifts away from governments and towards businesses, Sharp (2006) argues that corporations have the potential to make their CSR interventions where there are gaps in the state’s efforts, allowing for a political critique of government inefficiency and corruption. Whether this actually occurs, however, cannot be guaranteed, as seen from the discussion of Frynas (2005) earlier.

In conclusion, we argue that CSR is not a fitting alternative for development in its current form. The tendency to privilege business motives over the needs of the communities intended to be aided limit the potential of CSR to deliver long-term development solutions. Moreover, a lack of engagement with local communities may result in projects that instead of benefitting communities disrupt their social organisation.

References

Blowfield, M., (2005). Corporate Social Responsibility: reinventing the meaning of development? International Affairs, 81(3), pp.515–524.

Frynas, J. G. (2005). ‘The false developmental promise of Corporate Social Responsibility: evidence from multinational oil companies’, International Affairs, 81(3), pp. 581-598.

Gilberthorpe, E. and Banks, G. (2011). ‘Development on whose terms?: CSR discourse and social realities in Papua New Guinea’s extractive industries sector’, Resources Policy, 37, pp. 185-193.

Moura‐Leite R. and Padgett R., (2011) “Historical background of corporate social responsibility”, Social Responsibility Journal, 7(4), pp.528-539, https://doi.org/10.1108/1747111111117511

Sharp, J. (2006). ‘Corporate Social Responsibility and Development: An Anthropological Perspective’ Development Southern Africa, 23(2), pp. 213-222.