CSR is Insurance

Milton Friedman suggested a long time ago that socially responsible deeds that companies perform make sense only if there is a benefit for the company.

Now Freek Vermeulen, an Associate Professor of Strategic & International Management at the London Business School writes in his blog about CSR and its financial effect on companies.

He comments that there has been no evidence to prove that being socially responsible is financially beneficial to companies. In fact, it helps companies if they are in trouble.

Professors Paul Godfrey, Craig Merrill, and Jared Hansen, from Brigham Young University and the University of North Carolina, came up with a clever insight why the socially responsible types may be better off after all. They didn’t just look at the social and financial performance of all kinds of companies–they decided to specifically focus on companies that got into trouble because some negative event had happened to them. This could be the initiation of a lawsuit against the firm (e.g. by a customer), the announcement of regulatory action (e.g. fines, penalties) by a government entity, and so on. Then they measured what happened to the share price of the company as result of the event. Their finding? The degree to which you were punished by the stock market for the negative news depended on how much of a socially responsible company you were.

CSR may be insurance but again, it is still not justification enough.

We have covered those topics before.

Doing Well and Doing Good:

Joshua Margolis and Hillary Anger Elfenbein, writing in the January 2008 edition of the Harvard Business Review (subs req. free for the month) on social responsibility inform us that after a meta-survey of 167 surveys over the last 35 years they find that there is a low correlation between doing good and doing well in business sense.

Shubh Labh:

Meeting human needs is a big opportunity, and by being efficient and economical it is good for the shareholders. Considering the earth’s living system in design and operating decisions is being fair. To treat stakeholders with respect is just. To be committed to the well being of both economic and ecological systems is ethical business.

As the Dow Jones Sustainability Index defines it : Corporate Sustainability is a business approach to create long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.

Sustainability; from a business point of view; is all about “Shubh Labh” – to make a fair and just profit.

There is a case for sustainable business but please do not put that under the wrapping of CSR.


One thought on “CSR is Insurance

  1. Pingback: Sustainability strategy in the downturn « World is Green

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