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Corporate Social Responsibility – Is it a Good Thing?

By Paul Sloane

It is fashionable for large businesses to put significant resources into Corporate Social Responsibility (CSR) programs. They dedicate staff and money to worthwhile causes. They tell stakeholders and applicants how responsible and caring they are. They can boast about their worthy projects. It all makes for good PR.

Maybe businesses should focus on what they are good at and stay out of dabbling in worthy causes. Why? Well quite simply, if an oil company does an excellent job at extracting, refining and delivering oil products then it will fulfill its obligations to society. It will employ many people – who all pay taxes. It will give business to many suppliers. It will pay corporation tax. It will boost the economy and fund the taxes and social programs of the elected government.

We would not expect a school, a hospital or a police force to put their scarce resources into CSR programs. They should focus on educating pupils, helping the sick or catching criminals. So why do we expect banks and pharmaceutical companies to divert resources into ‘good causes’? Shouldn’t they leave that to the organizations dedicated to those causes?

Of course businesses should act ethically. They should treat their customers, their employees and their suppliers well. They should take care with the environment they affect. This is all good business practice that helps corporate improve the performance. Consider this. A bank spends $10m on building a nature reserve in its CSR program. If that $10m went into profit instead then it would pay an extra $3m in tax – which would pay for more teachers, nurses and policemen. It would pay say an extra $3m in dividends – which would be better for shareholders and pension funds paying pensions. It would retain say an extra $4m for investment in research or innovation or to strengthen the reserves. Where does the $10m serve society better?

Is CSR a worthwhile focus for corporate time and effort or is it a palliative, a smokescreen and a distraction? Perhaps businesses should do well what they do well and leave doing good to the proper agencies.