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Tuesday, October 14, 2014

Strategic CSR - What is CSR?

The article in the url below from the Financial Times demonstrates much of what remains troubling about the CSR debate:
"US and UK companies in the Fortune Global 500 spend $15.2bn a year on corporate social responsibility (CSR) activities, according to the first report to quantify this spending."
Given the descriptions provided, the only way the authors of the report could determine what spending constitutes "CSR spending" was to add up all of the figures voluntarily declared by each firm. This is problematic because the authors are forced to rely on how corporations currently think about "CSR" and, as a result, quickly fell back on a definition that equates CSR to philanthropy:
"In-kind donations, such as donating free drugs to health programmes or giving free software to universities, accounted for 71 per cent of the $11.95bn US spending on CSR. … In the UK, while donating goods and services in kind was the largest component of the $3.25bn CSR activity, it totalled just 46 per cent of the total. Employee volunteering and fundraising made up 34 per cent and cash contributions 20 per cent."
What is increasingly clear to me, however, is that all activity by the firm constitutes CSR. That is, if we define CSR as the value added by the firm. In other words, while it can be helpful to think of economic value and social value as separate constructs; in reality, they are not independent. On the contrary, they are highly correlated and are infused in the firm's decisions regarding production (e.g., Do we pollute the local river, or not? Do we hire at the minimum wage or a living wage?) and the consumer's decisions regarding consumption (e.g., Do I buy from the firm that produces domestically or the one that outsources? Do I pay the premium associated with a more environmentally-friendly product or purchase the cheaper, disposable product?). All of these production and consumption decisions contain value-laden consequences that, ultimately, determine the economic success of the firm (and the value it adds to society).
In contrast, most of the published research/commentary on CSR that I see still treats economic problems and social problems as separate entities (see Michael Porter's Shared Value idea as one of the more egregious examples). Again, a simple thought experiment highlights the overly-simplistic nature of this forced dichotomy. Is feeding people a social problem or an economic problem? Of course, there are hundreds of for-profit food manufacturers (not to mention the hundreds of thousands of restaurants) that produce food and distribute it widely (and efficiently) to whole populations of people. What about clothing people—a social problem or an economic problem? A visit to the mall will quickly reveal how efficiently for-profit firms have essentially eradicated the supply of clothes as a challenge for all but the most deprived societies. Or, what about providing internet access to every household in the country—economic or social? Certainly, you could make an argument that, today, a family is essentially excluded from many aspects of society if it cannot get online; yet, internet provision in most developed economies is the sole responsibility of the private sector (as it is for the food and apparel industries).
While the FT does some good work by promoting CSR more than most media outlets, this story demonstrates they still have a way to go to fully understanding the parameters of this important topic and, as a result, what its consequences are for business today.
Take care
David Chandler & Bill Werther
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Fortune 500 companies spend more than $15bn on corporate responsibility
By Alison Smith
October 12, 2014
Financial Times