Voluntary Corporate Social Responsibility: The Power of Convictions

29/09/2010 at 22:29 5 comentarios

Lately I have been very interested in the discussion whether Corporate Social Responsibility (CSR) should be mandatory (forced by the government) or voluntary (as part of corporate strategy). First of all a couple of remarks:

  • CSR (as well as all kind of responsibility) is per definition voluntary. Whether you are responsible or not, it’s the consequence of a choice you are taking.
  • We have to put everything in its context: What applies for Spain, the States, the UK or Germany, does not necessarily have to apply for Brazil, China or India. Even between the UK and Germany there will be remarkable differences due to different corporate culture, historic reasons, etc.

I have mentioned India. India is a country where the government is planning to pass a law to make CSR mandatory. It’s not just a regulation to promote or help companies who want to be socially responsible. It’s a law that decrees that companies should dedicate a 2% of their net profits to CSR activities. In India, mandatory CSR is a solution to reach places that the State cannot reach on its own. That’s why the government turns to big corporations and asks them (force them) to make a contribution to society.

Another example of a country where big companies have to issue mandatory sustainability reports is Denmark. However, in Denmark companies are not forced to dedicate a certain quantity of their profits for CSR actions. There are other countries, such as the UK or France, where sustainability reporting is mandatory for listed companies. But, is this a guarantee that companies in these countries are more socially responsible than in other countries where CSR is voluntary?

Spain is a country where it’s the corporate world who is taking the lead, partly due to the inactivity of the government. There are some initiatives from regional governments in order to promote CSR among small and medium companies, but they do not pursue mandatory CSR or reporting for private owned companies. According to the ranking “Global 100 Sustainable Performance Leader”, of the 1000 more sustainable companies, 11 are Spanish. The Spanish, voluntary CSR approach does seem to work, then.

I doubt that mandatory CSR could be a global solution. After all, CSR is a way to manage a company. It defines your dialogue with the stakeholders. Whether companies choose to be responsible or not, has to be left to their discretion. Sooner or later they will be aware of the benefits of being responsible (or the disadvantages of being irresponsible).

Why do I favor voluntary CSR?

Promote, not impose

CSR is deeply connected with values, not with laws. Values cannot be forced, they can be promoted, taught or awaken. Besides, who is going to define what CSR is? Is it going to be the government?

Where there is law, there is fraud

If someone is forced to do something, there will always be a temptation to skip the rules. Sometimes fraud cannot be discovered so easily. However, if a company decides not to be socially responsible, it’s more likely that its stakeholders will end up unveiling it and punishing its behavior.

Forget political issues

If law forces CSR, political and partisan interests will probably interfere. Who wants to leave CSR in the hands of political fights?

CSR as soft power tool

I am fully convinced that a soft CSR approach (voluntary CSR plus public promotion) is far more effective than a hard CSR approach (mandatory regulation). Soft power is in the very soul of corporate sustainability.

Convictions, not impositions

Voluntary CSR is connected to convictions and commitment. It’s something that comes from inside the company, with a desire to change things and create value. It has a psychological explanation: Mandatory CSR is imposed from outside the company and it may not be perceived as own.

CSR for competitiveness

Companies have to be able to decide which way they want to go in order to improve their competitiveness. Voluntary CSR is one of the ways. In the end I am convinced that socially responsible companies will be more competitive than those who are not.

As I wrote earlier, I do think that there should be a certain public CSR regulation. However, this should promote CSR, not force it. Of course, we need to have minimum standards, a certain framework that set the rules of the game. But we already have it. This set of standards has been created by the industry itself or by international organizations. It is not a task of the government to create new standards, but to support the ones that are already available.

What do you think? Is mandatory CSR more effective? Can we leave CSR extrictly to companies’ discretion? I would love to hear what you think.

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Entry filed under: Corporate Social Responsibility.

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5 comentarios Add your own

  • 1. davidcoethica  |  30/09/2010 en 10:45

    The problem that most arguments on the voluntary v mandatory CSR debate often sound confusing and contradictory. On one hand companies are being told that they don’t need CSR departments or managers yet there are calls for specific CSR regulation? Integration or not?

    We already have regulation across certain elements of the CSR agenda such as the Carbon Reduction Commitment in the UK.

    Although being personally in favour of better regulation, rather than more, the debate also needs to consider the role of CSR v compliance. If everything was regulated would it cease to be CSR, after all is regularly defined as going beyond compliance.

    No real answer here but a couple of issues to throw into the ring.

    Responder
  • 2. Juan Villamayor  |  30/09/2010 en 12:57

    Wow, interesting questions you are raising! Since CSR is continuously evolving, every try to regulate it will always come too late.
    Companies, organisations and industry are already developing standards and best practices catalogues. Regulation should help companies to adopt these sets of best practices, not create new ones. I favour integration in order to be able to compare and benchmark, according to the standards I mentioned before.

    I agree with you that we need better regulation, not more. After all, responsibility is voluntary, otherwise it’s obligation… But let’s dont rely too much on public regulation. Companies have to proactive when it comes to CSR, they have to go beyond, anticipate stakeholders needs and find solutions.
    Like I said, very interesting issues!

    Responder
  • 3. Genona  |  04/10/2010 en 09:19

    I agree with your thesis : when rules are imposed, responsibility disappears.

    Responder
  • […] October 28, 2010 Very interesting article on the nature of Corporate Social Responsibility found on Juan Villamayor’s blog (Economist/MBA with an international approach and expert on sustainability/CSR): Lately I have been very interested in the discussion whether Corporate Social Responsibility (CSR) should be mandatory (forced by the government) or voluntary (as part of corporate strategy). First of all a couple of remarks: CSR (as well as all kind of responsibility) is per definition voluntary. Whether you are responsible or not, it’s the consequence of a choice you are taking. We have to put everything in its context: What applies for Spain, … Read More […]

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  • […] Juan Villamayor for example writes in his blog post that CSR is about the “power of convictions“ and should remain voluntary. He gives examples of other countries like Denmark, UK and France where reporting on CSR practices is mandatory but investing in CSR is not. […]

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Juan Villamayor

Consultor en Responsabilidad y Sostenibilidad Empresarial (RSE). Economista y MBA radicado en Barcelona, con un perfil eminentemente internacional.

Es posible generar más valor mientras se aplican principios éticos. Al final todos salen beneficiados: las empresas, la sociedad y el medio ambiente. Eso es lo que yo llamo "Negocios Con Sentido Común".

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