Are we trapped in the CSR bubble?
Updated: Nov 21, 2022
The Corporate Social Responsibility (CSR) movement has significantly increased and has become the domain of the business topic. The same trend goes with ethical consumerism. All in all, the two trends brighten the market's future.
So What is CSR?
While some people perceive CSR as philanthropy, CSR is actually a much more broader concept. Ideally, it is the way corporations interact and show their responsibility to their stakeholders, balancing their needs of economically prosperous with a strong society and healthy environment. These efforts corporations make which are beyond and above what is required by law. Or, to put it another way, businesses are "profiting" from all parties involved, including shareholders, workers, the community, society, and the environment.
So How about Ethical consumerism?
There are different ways to define ethical consumerism. In this article, ethical consumerism is the practice of purchasing products/ services that put no unnecessary negative impact on society and the environment; at the same time, avoid the consumption of those which cause social and environmental impacts.
Some people may feel optimistic about the ability of market mechanisms to bring about social and environmental change as a result of the expansion of the CSR industry's phenomenal and Ethical consumerism. The amount of money invested in CSR initiatives or socially responsible investing (SRI) funds has been rising exponentially each year, and the majority of sizable businesses worldwide now issue voluntary CSR and sustainability reports alongside their regular yearly financial reports. Thus, socially conscious brands and the ethical consumerism movement are growing rapidly. For example, according to the Ethical Consumer Research Association, in the UK alone, the size of the ethical consumer market worth now at £122bn, which has increased nearly 24% from 2019 to 2020.
But are we trapped in an optimistic bubble?
The problem with assuming that companies can do well while also doing good - in other words, CSR growth, is that markets don’t really work that way. Being ethical and responsible will become a luxury for companies when the market goes down and tighten their profit. This is the reality many companies, especially medium and small enterprises, are facing nowadays.
So what if we rely on consumers to be ethical and drive the change? Well, it is a big dream.
Myth 1: The ethical consumer will drive change.
Although a small segment of the market actively rewards ethical companies, ethics are a relative concept for the majority of consumers. In actuality, most surveys reveal that consumer concerns are centered around matters like price, flavor, or sell-by date rather than being ethical. One of the surveys in the United Kingdom shows that fewer than 5 percent of consumers show consistent ethical and green purchasing behaviors.
Sometimes people's responses to surveys don't match up with what they actually do. Not many people aspire to be irresponsible or unsustainable in the way they consume. When it comes down to it, however, other considerations—at least for the majority of consumers—such as price, flavor, and quality, take precedence over sustainability. Therefore, sustainability must be a bonus along with other advantages. However, it is true that individuals are more aware of sustainability and will attempt to implement it when they can, and where doing so must not be too expensive or disadvantageous in other ways.
“The truth is, the gap between green consciousness and green consumerism is huge,”
Going one step further in criticizing ethical consumerism, some believe that there's no such thing simply because ethical consumption doesn't exist under capitalism. According to Lena Greenberg - Corporate Accountability senior media organizer, our economic system, by design, serve the purpose of extracting wealth from people and the planet to fuel the corporate. That said, there is no way we can behave ethically in that system with all unethical choices. According to this viewpoint, ethical consumerism is a fallacious decision that shifts the moral responsibility from the producer—who initially creates the unethical products—on the customer.
"Therefore, nothing we do is ethical in a system that is designed to force us into unethical choices."
Myth #2: The CSR race
The idea that increased competition among businesses will result in more ethical competition is another CSR myth, which is refuted by the rise of award programs for ethical businesses like the Business Ethics Awards or Best Companies to Work For competitions.
While some might argue that companies are naturally eager to support CSR initiatives since they provide positive PR, but in most circumstances, corporations might be able to profit from well-intentioned initiatives without necessarily changing their behavior. Does portraited social responsible company also good at hiding socially irresponsible behavior? The argument continues to some indices/ rating schemes. but all such schemes call for other questions. What is the standard? What is the regulation? How come questionable companies such as tobacco or oil win the award? A new risk has polled, are we rewarding the "best of the baddies"?
Myth #3: In the global economy, countries will compete to have the best ethical practices.
It is true that CSR has risen in popularity in developing economies. However, it is quite a false assumption that market liberalization and globalization will raise the company operation standards, lead to better protection of human and environmental rights, actively push the implementation of CSR programs and policies. Especially in the developing world, these policies often are non-binding. As a result, companies often make the excuse of operating within the law, which is the lowest point, to avoid these voluntary standards of behavior. In fact, sometimes, globalization with competitive foreign investment pressure among the developing nations, in deed harms the effort to raise up the corporate standard and limits governments' power in protecting human rights or environmental standards. The case once happened in the textile and garment industry in Sri Lanka, where competitive pressure from neighboring China has actually increased the working hours.
So what do we need to do?
Financial tool with government hand
Despite how much debate is, one thing can not be denied that social responsibility is just like other aspects of business, a financial tool. That being said, the most effective way to influence the corporate decision is to impose a high consequence cost for their action. Thus, the ultimate solution for this is making these mentioned standards as binding regulations that the government will have the right to enforce through incentives, taxes reduction, punitive fines, etc.
But it is still a long run for many developing countries, especially the ones that face corruption practices or are heavily under industry influence.
So in the meantime, we need to find other ways to monitor corporate behavior - Watchdogs
Watchdog organizations will play an important role in providing a neutral voice for a wide variety of social, political, environmental, ethnic, cultural, and community interests. However, this can't be the mainstream but rather the add-on for imposing constraints on corporate behavior since these voices can also be manipulated.