Is Corporate Social Responsibility the End or the Beginning of a Disruptive Force for Large Corporations?

Is Corporate Social Responsibility the End or the Beginning of a Disruptive Force for Large Corporations?

By Jørn Andersen

Schumpeter’s notion of ’creative destruction denotes how something new replaces the old by allowing for new ways of doing and organizing economic and societal activities at large. But what if something is just being destroyed and only leaves a void in its slipstream? Who will pick up the pieces and innovatively design the next generation of solutions?

For more than two centuries the state used to play a big role in pioneering innovations, most of which were beneficial for both private enterprising and public life. Take the postal services and stamps and think about what the positive impact it had for communication.

Throughout the 20th century the three institutions of big business, big government and big unions shaped most of what happened in peoples’ lives. Big business made sure all had a job and provided the products and services for the consumer society. Big unions organized not only the working conditions and salaries with big business, but equally played a role in regard to organizing sports clubs and community activities. Big government also built the institutions of the welfare state, notably near universal access to education and health care as well as a fine knit masked web of social services.

Big unions and government became challenged at their core functions from the early 1980s. Thought leaders from various quarters began questioning the actual value of big unions and government programs and called into question if unions and governments in reality had become more of a millstone than a milestone for economic development of welfare of people.

The inability of especially the unions to reinvent themselves and understand the changing tide and value migration of its customers has led them into becoming a historic relic in the USA and Western Europe. The unions simply kept looking at the world from a ‘producer point’ of view and never seriously understood how to come up with a new business model design. Hence, in most cases the average unionized person is 50+ and the steady state is that of loosing appeal to new generations.

Big government and public institutions managed arguably to keep their activities afloat for years longer than the unions. But big government’s had already in value terms been in decline since the 1970s and as it didn’t manage to adjust and reinvent itself, and sketch out a roadmap of new innovations and relevant activities, big government has become subject to relentless attacks from its critics, big business’ need for deregulation, globalization, personalized services instead of mass customization and so forth.

Finally, with the financial crunch in 2008 and big governments decision to bail out the investment banks of Wall Street and elsewhere, big government not only lost its financial ability to play, it also lost support from its die hard last standing supporters among people often most dependent upon government services. As such governments and traditional incumbent political have lost their license to play as witnessed by the uprising of protest parties like the Tea Party, UKIP in the UK and similar movements in the EU. So far this is that tale about how two leading institutions – big unions and big government – who led and shaped the lives of most people in the USA and Western Europe became unable to reinvent and innovate, and thus turned into the cement of society.

This leaves us with big business as the other part of the tale. As customers we usually have three relations to our providers:

  1. Loyalty: if we like the service or product.
  2. Complaints: if it fails to meet expectations.
  3. Exit: if the company doesn’t correct our unmet expectations.

The same counts for most of us as citizens, ultimately we exit or vote with our feet and leave the party and look for something that can meet our expectations and satisfy our needs. Since 2008, this “something” has  turned out to be big business. As the only ‘last man standing’ of the three big institutions of the 20th century, big business is increasingly seen as the savior of all the activities and needs that unions and big government are no longer capable of delivering on.

The last five year surge in Corporate Social Responsibility, i.e. shared value instead of shareholder capitalism, is all evidence to the fact that big corporations are getting deep into activities that governments used to typically look after. Surely, the naked version of capitalism that the only function of the corporation is to make a profit was unsustainable in several ways, and the pendulum had to change after 2008.

But it can be argued that while the opening game of rolling back the state and unions in the 1980s and 1990s and 00s draws to a close, the middle game of understanding the future positions of big business is just about to emerge. And it is not difficult to envision an endgame scenario where big business a few years down the road from now, will have to ask themselves, what was our strategy and plan for getting into CSR.

With jobless growth, unions obsolete and cash starved governments; big business has only seen its CSR activities grow, and increasingly people are looking to big business to fix the problems that unions and governments used to. Big business might soon realize, that doing good and doing good business has to be authentic and consistent because one major blunder, and the public jury will be out for years. Starbuck’s has volunteered about a million hours to CSR causes, but the company is now widely known in Europe for its tax evasion. In a similar vein Nestlé’s image is still associated with the baby milk scandal in the 1970s in spite of countless later CSR initiatives.

Disruption denotes a change in the underlying values governing an industry or for that matter a free enterprise society. The financial crisis marked the endgame of pure shareholder capitalism and marked the beginning of corporations entering a new era of CSR. The deeper corporations go into CSR it will also change their DNA. But it is one thing to enter, whereas it is another to know how to exit or understand the boundaries. Without a clear integration of CSR for growth and innovation strategy corporate CSR initiatives could turn out to be somewhere between best hope or blind alley. PPP doesn’t only stand for public-private-partnership; it also stands for people, planet and profit. The last part of the equation is still the foundation for being in business.

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