Considering the Ripple Effects of the Economic Crisis: What will Become of Corporate Social Responsibility?

With no tangible end in sight as of yet to the current economic crisis, many are beginning to wonder what is to become of corporate social responsibility (CSR) initiatives around the world. This question is of particular relevance to the work of Ashoka and other citizen sector organizations like it whose endeavors are largely made possible by strategic partnerships under the auspices of CSR programs of various firms and organizations. Of course, as of now, no concrete conclusions can be made, but that has not stopped speculation from looming within the business and development communities.

Pessimists believe that the days of CSR programs are numbered, viewing them as merely a fad with no real economic value. Optimists, on the other hand, envision the recession resulting in the bolstering of corporate responsibility where CSR initiatives will determine which companies sink or float. Obviously, CSR budgets are going to be tightened severely and firms that previously did not have CSR programs before the global recession will be more hesitant to adopt them now. That being said, CSR programs disappearing across the board remains to be an unlikely outcome of the economic downturn. Instead, we will most likely land somewhere in the middle of the spectrum between the two extremes of pessimism and optimism. After all, in regards to Ashoka Arab World’s activities, CSR programs that directly affect it are thankfully alive and well. For instance, Ashoka continues to work actively with Nike to add new value to the current projects and causes of its fellows and increased future work with McKinsey & Co. is in the pipeline.

Nevertheless, one thing is becoming increasingly clear to those in the know, the current crisis represents a tremendous opportunity for change—one which is not to be missed by social actors and the business world. The economic turmoil has shed light on the untenable degree of greed and selfishness that has been allowed to permeate unfettered for far too long within the global private sector. For years, firms myopically put short-term gains before long-term concerns, paying little respect to ideas of value that addressed profitability while incorporating ethical considerations. The current financial decline provides an excellent opportunity to reverse this paradigm towards the adoption of a new operational trajectory where bottom lines are instead expanded to encompass social and environmental goals and firms commit more actively to responsible investment. If we are to learn anything from the set of events that got us into this quandary in the first place, U.S. President Barack Obama’s call for a “new era of responsibility” can no longer be viewed as an ideal, but instead new rules and incentives need to be set into place to commit markets to operating in the interest of society. We’ve now reached a point in our globalized world where business operations are inextricably linked to greater issues concerning economic, social, and environmental integration. Therefore, if we are ever to achieve global common prosperity, social progress, and stability, a value shift towards a new culture of responsible business is a must.

Continued and expanded investment in corporate responsibility programs is one crucial and necessary step towards achieving this goal. The perceived benefits of corporate responsibility have been well documented. In a Competitiveness Report published in 2008 by the European Commission’s Directorate-General for Enterprise and Industry, researchers argued that “competitive advantages of CSR are increasingly linked to innovation and to the creation of new value in a sustainable way.” In another study conducted in the aftermath of the failed 1999 World Trade Organization talks in Seattle, Karen E. Schnietz, PhD, and Marc Epstein, PhD provided empirical support to the claim that “investments by a firm in corporate responsibility yield tangible financial benefits.” Their findings suggested that “firms that are reputed to place a value on being socially responsible and that communicate that value to the public may be better positioned to ride out the storms centering on socially responsible business practices than are firms that do not.” Indeed, if anything, far from heralding the end of corporate social responsibility, this crisis may prove to be of paramount importance in validating its worth…

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One comment on “Considering the Ripple Effects of the Economic Crisis: What will Become of Corporate Social Responsibility?

  1. JPMorgan and Goldman bonuses and risk-taking (i.e., ignoring the society’s criticism regarding the financial crisis) may be a counterexample to the importance of CSR in business. I just posted on this example, in case you are interested.

    Nice post!

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