February 3, 2009

Responsibility & Recession

What are the major issues CSR practitioners are thinking about as they predict the impact of the recession on this field? What kinds of social responsibility programs are companies most likely to maintain in the face of financial pressures?

As you can probably guess, business school students talk a lot about the current economic situation. It comes up in the classroom, in speeches by visiting business leaders, and certainly in conversations about the job search. Somehow, though, I don't think I fully grasped how big this is until I was in New York last week for the Conference Board's 2009 Leadership Conference on Global Corporate Citizenship.

In the city where so much of this started, the financial crisis dominated conversations of all sorts. At dinner with a friend who works in investment banking, we talked about how many of her coworkers have been laid off recently. Over lunch with a former colleague, we discussed the impact on the nonprofit sector. At the conference itself, as I mentioned in
my post on Thursday, the impact of the economic crisis on corporate social responsibility was a major theme.

Over the course of the next few months, I plan to explore the implications of the current economy on corporate social responsibility, for the purpose of understanding what we can expect in this sector over the next few years. I also think that studying how companies react to these trying circumstances helps us to understand the role that CSR plays within their organizations - for instance, are these programs a "nice to have" that can easily be cut back, or are they truly integrated into the business model?

Attending the Leadership Conference on Global Corporate Citizenship was a very helpful way of diving into this big question. The conference was attended largely by high-level CSR practitioners who spend their time dealing with these issues, so I found it illuminating to hear what they're thinking.

The major perspectives that I heard, on the question of how the economic crisis will impact CSR, included the following:

  • We should indeed expect to see some "CSR attrition"
  • With so many people negatively impacted by the recession, CSR is more necessary now than ever
  • The political climate and President Obama's message of responsibility make this the time to focus on CSR
  • If CSR is actually part of a company's culture, its employees will find a way to keep going, despite the external context
  • Pulling back from CSR initiatives during bad times destroys trust
  • The recession will provide an opportunity to differentiate between companies that truly believe in CSR and those who "pay lip service" or are just in it for the good PR - and this revelation may have long-term consequences

I find this last notion particularly intriguing, because I don't agree with the apparent underlying assumptions. There's certainly something satisfying about the logic - the idea that a company would capitalize on a social problem to generate good press, only to turn its back on the cause just when its involvement is needed most, does indeed feel a bit sleazy. Ultimately, though, do the company's motivations for engaging in CSR truly matter?

Here's what I want to see in a CSR initiative - I want to see a program that's embedded in the business. I want to see a program that really and truly is win-win, so that it doesn't rely on good intentions for its continued survival. Maybe the company in question has designed an environmental program that really does decrease costs, for example, or maybe it has engaged with suppliers in developing economies on programs that both improve the quality of the product and the suppliers' quality of life.

Sure, it's great if a business leader has a sense of responsibility to the world around him, if she believes that improving lives through better business practices is simply the right thing to do. I can imagine that such a leader could come up with some pretty amazing programs. But when the next CEO comes along (or maybe the next recession), which programs are most likely to be preserved, the ones that the previous leader "truly believed in" or the ones with a clear benefit to the company?

The recession might indeed provide an opportunity to differentiate between companies that truly believe in CSR and those who are in it for the business benefit - because by my logic, it's the latter group that will choose to continue their programs. Of course, these motivations aren't mutually exclusive, and "good PR", while certainly a business benefit, may be less compelling than benefits that can be more clearly tied to the bottom line. Furthermore, this assumes a basic set of ethics and a legal framework that do not rely on business benefit (i.e., prohibitions on child labor should not have to rely on a business case for why they make sense economically).

I hope I don't sound cynical, because the overall message I got from the conference, on the issue of CSR and the economy, was definitely optimistic. Generally, the participants seemed to see a strong future for CSR, not just in spite of the economy, but perhaps even because of it. This sentiment was best captured in closing remarks by
David Vidal, Research Director, Global Corporate Citizenship at the Conference Board. By using this recession as an impetus for identifying future opportunities and redefining the field's objectives, he told us, "Let's not waste this crisis."


  1. Great post Jessica. It is an interesting point that because companies are run by different people over time, CSR programs cannot be sustainably managed because the cause is important since different managers will view programs differently.

    Maybe this also highlights a need for CSR to be managed according to impact metrics because an objective measure can allow multiple managers to stay focused on a project rather than drifting away to a new project that has a special place in their heart.

  2. Hi Jessica,

    Great new blog- I'm a big fan of your brother's blog which just tipped me off to yours.

    I'm a bit confused by your use of the term "CSR". You seem to only be focusing on corporate philanthropy, rather than labor relations, human rights, environmental sustainability, employee volunteerism, etc, etc. For purposes of clarification, perhaps you could better define what you mean by CSR.

    As the leader of a corporate foundation, I can tell you that I agree 100% with creating win-win situations. However, the IRS does not agree with this philosophy. In fact, they make it very difficult to create win-win programs. Google was brilliant in their move to bypass nonprofit status for their foundation. The freedom that comes with this tax status is enviable.

    I believe in the future we will see more and more B Corps springing up without separate nonprofit Foundations associated with them. I would argue that Whole Foods was already doing this, and didn't need to set up a Foundation. It provides them with a tool to collect OPM (other people's money) at the register, so I'm guessing that was their motivation.

    I have also noticed a dearth of corporate operating foundations, which is actually quite surprising. Most corporations have institutional knowledge and in-house resources to create and manage social benefit programs, especially if their Foundation’s mission is well aligned with their business. It’s very curious. Perhaps we will see more of this model moving forward.

    I’m not saying traditional grantmaking corporate foundations shouldn’t exist, I am simply saying that it’s not the only option for creating meaningful social change.


  3. Carrie -

    Thanks so much for your comment, and for checking out this blog! I completely agree with you about the definition of CSR – I prefer to define it as broadly as possible. I would include the way the company operates its business (e.g., manufacturing practices, energy management), the way it interacts with its stakeholders (including your example of labor relations), the way it invests its financial resources (whether that’s grantmaking or profit-generating investments in businesses that create social benefit, as Google.Org has done), the way it uses its human capital (e.g., employee volunteerism, encouraging R&D staff to develop products with a positive social impact), and so on. My own job experience is in corporate philanthropy, so I may inadvertently bias in that direction – if that happens, it would be so helpful if you could point it out.

    I’m also very interested in a number of the other topics you address, especially the way companies structure their CSR activities (foundation, dedicated department, pushing these activities out into operating units) and how companies can create social impact in-house, rather than (or in addition to) “outsourcing” it through charitable gifts.

    Thank you!

  4. Here's a data point:

    In the past month I have met 3 job hunters that have been kicked to the curb from their corporate philanthropy posts.

    It seems that their departments have devolved back into marketing, public affairs, and the usual margins of lip servicy corporate do-gooderism.

    They were peeved because they thought there was a corner office committment to an expanded notion of CSR.

  5. Interesting…did these people lose their jobs because the volume of grants has gone down (you mentioned corporate philanthropy jobs in particular), so the company needs fewer people to do this work? Or was their work reassigned to new people in the marketing/PR/etc. departments? If it's the former, I can imagine (hope!) that these companies will scale back up as their profits and thus their philanthropic dollars increase. If it's the latter, though, I wonder if these companies will in fact shift back to the "expanded notion of CSR" once the economy rebounds, or if this is a new trajectory.

  6. Hi Jessica,
    Great blog. Two things:

    My company Impakt has just stated a wiki to spark discussion about corporate social purpose and we've included a feed to your blog on the blogs and news page - see http://corporatesocialpurpose.wikispaces.com/Blogs+and+News

    Also, I write a CSR blog for Canadian Business Magazine and just posted some questions yesterday that relate to this topic.

    Have the irresponsible actions of banks, mortgage lenders, and others in the financial sector pushed other corporations to be more responsible and community-minded?

    Has the corporate responsibility “bar” been raised to a level that wouldn’t have happened without such extraordinary avarice from the some in the corporate sector?

    Beyond the dangerous aspects of this recession, is this also a time of opportunity where corporations can establish an authentic sense of social purpose that resonates with employees, customers, investors and communities?

    Or, should corporations simply stick to the business of business?

    You can access this blog at: http://blog.canadianbusiness.com/category/paul-klein/

    Thanks for making an important contribution to CSR.