Does corporate social responsibility ever really work?

Does corporate social responsibility ever really work?

Events 07/10/16

Unilever’s boss, Paul Polman, has become something of a modern-day hero, straddling the worlds of big business and environmental responsibility while still maintaining his balance.

For many in the environmental sector he offers hope. Here is a CEO who understands that businesses cannot endlessly plunder the planet for their own short-term financial gain if the long term consequences for everyone are dire.

For other business leaders, Mr Polman is an experiment to watch. Here is a man who wants to take business down a radically different path. He says his business must nurture nature if it wants to be around in another couple of hundred years. He is an “optimistic pessimist”, believing that big global challenges like climate change can be solved if we all work together. Companies can produce goods sustainably, he says. They can be good for shareholders and the planet at the same time.

Unfortunately he is wrong. Mr Polman’s plans will not work at Unilever, or elsewhere – or at least not without some help. Right now, Mr Polman’s bold ideas have little more substance than the gases that are released from Unilever’s factories.

This is not to diss Mr Polman or anyone who promotes Corporate Social Responsibility (CSR). He believes what he says. Like others who encourage CSR, he wants to bridge the great business-environmental divide, and build a better world.

The trouble is, he can’t. The system simply doesn’t work like that. It does not reward businesses that do good. It rewards those that deliver ever-higher short term profits.

Just that.

Like me, you might not like that, but that’s the way it is.

If a company like Unilever wants to make deodorants or toothpastes that are ecologically friendly, it will succeed only up to a point. As soon as someone else can do it cheaper – even if they trash the planet – they will win. Some consumers may be willing to pay more for sustainable goods, but the majority are not. So Mr Polman’s business will lose market share – and he will lose his job.

It may not be fair and it may not be right. But that’s the way it is.

Can we change this?

Of course we can. Society could deliberately favour companies like Unilever, even if their goods cost more. Not just by encouraging people to buy their products, by appealing to their sense of environmental responsibility. But by intervening in the market.

The only way to make ideas like Mr Polman’s work is by penalising Unilever’s rivals, by taxing their undesirable activities.

Mr Polman cannot do it alone.

Graeme Maxton

Graeme Maxton is the Secretary General of the Club of Rome — a global network of renowned independent thinkers dedicated to addressing the problems facing humanity.

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