Voluntary Corporate Social Responsibility: The Power of Convictions
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.
Entry filed under: Corporate Social Responsibility.