As four Rio Tinto executives are jailed for bribery, and BAE Systems fined £30 million to settle further investigation by the Serious Fraud Office, it’s easy to be cynical about the ethical intent of large corporations.  Nevertheless, it is rare to find an organisation without a mention of ethical business in their annual report, but is this just ‘greenwash’ or ‘hogwash’?

Corporate Social Responsibility (CSR) is not a new concept. Business philanthropy existed as early as the nineteenth century with the development of model factory villages in the UK such as Cadbury’s Bournville and Lever’s Port Sunlight. What has evolved is how large corporations now respond to the challenges of a shifting and dynamic business environment. The way things were is not the way things are.  Chief Executives and their boards find themselves in a strange new reality – one where good corporate citizenship, stewardship of the environment and responsible business practice are no longer optional extras, they are ethical imperatives.

Today’s CSR landscape is often complex and multi-dimensional, involving diverse groups or individuals who may at times have contradictory or competing agendas which run counter to an organisation’s profit motives. And seismic trends such as globalisation and climate change have radically altered the role that corporations play in society. In counterpoint, the expectations that society has of these organisations has also shifted. We’ve moved on from Milton Friedman’s bold free-market view that ‘the social responsibility of business is to increase its profits’. In practice, the manner in which firms now conduct business cannot be disassociated from the perceptions of stakeholders – who may be impacted by such activities – nor can it exclude the judgement of stockholders – for whom financial performance is a key driver.  To put it another way…whether in Borneo, Beijing or Bradford, it is no longer possible for big business to operate independently of the society in which it finds itself, even if it wants to.

One of the most significant drivers in all of this is the transparency and immediacy of modern media. For the iPod generation, the sins of their corporate fathers can be streamed live via RSS feeds and mobile downloads. The inexorable rise of blogging and ‘tweets’ (via Twitter) means the battle lines for corporate reputation are being drawn virtually. Nowadays there is nowhere to hide CSR indiscretions, but doing nothing isn’t an option either. Errors can be costly in both financial and reputational terms. Corporations are primarily motivated by profit, so risk and opportunity also have a contribution to make in shaping CSR strategy and its eventual implementation. Wise organisations reach a compromise between ethics and economics.

This is an excerpt from a longer paper on CSR. If you’d like to know more about CSR strategy or implementation, please contact Lisa Bondesio via lisa@chiridion.com