February 12, 2009

Trust in Corporations

Forbes has published two articles recently that reference CSR; interestingly, both are primarily about citizens' trust in corporations (or lack thereof). One, published last week, focuses on the erosion of goodwill towards corporations in the wake of the recession. It reports on a survey that said one in three respondents believes corporations are primarily responsible for the recession (46% primarily blame governments), and on another study that found that people are increasingly likely to say that companies make too much profit (59% of respondents) and too few big companies have too much power (70%). The article argues that, in this environment, CSR is important. The other, published this week, centers on Asia; it says that “trust in business wavers” and encourages “private sector diplomacy” - that is, public/private partnerships that address “the region’s most pressing problems”.

I've been thinking a lot recently about the economy and it's impact on CSR. Of course, many of us are concerned that, as companies seek to eliminate spending wherever possible, they'll cut the resources that sustain their CSR programs. On the other hand, on this blog, we've discussed some reasons that this in fact might not happen: At the
Conference Board's recent conference on corporate citizenship, various panelists suggested that CSR should increase now because there's an increased need for it, or that cutting back on CSR damages trust. Reimagining CSR reader Elisabeth commented on a previous post that CSR initiatives can be leveraged "to sustain and even build brand equity in challenging times", while the Ethical Corporation Blog argues, "There is opportunity to gain trust.... Showing you can treat your customers, suppliers and business partners fairly, even when times are right, may help you build that bank account of goodwill, useful when you really need it. "

By the logic of the Forbes articles, I come to the following rationale (partially overlapping with those offered by Elisabeth and the Ethical Corporation blog) for redoubling CSR efforts in light of the economy: The recession - or, more specifically, major corporations' perceived role in sparking the recession - has led to an erosion of trust in companies; engaging in CSR, on the other hand, can help to restore that trust.

If the issue of trust links the recession and corporate citizenship, should we in fact expect to see an increase in CSR efforts?

3 comments:

  1. An important question which has yet to be answered is... how are companies going to promote their CSR initiatives? Will they simply post news of their initiatives on their company websites or will they pursue other distribution channels?

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  2. One of the problems with CSR is that many people don't trust CSR initiatives. So I wonder if CSR can effectively help companies build trust with consumers.

    As you know, I've written a lot about transparency in the nonprofit/foundation field. Are their any examples of "transparent" CSR initiatives? Their was a lot of talk when RED was new, that no one knew how much was actually going to charity. Are their ways that CSR programs could be designed so that anyone who cared could figure out just how much the program was benefiting the company and how much it was benefiting the cause?

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  3. That's a good point - if a company is truly having a positive impact, that might increase our trust in that company, but if we currently don't trust the company and thus don’t believe what it tells us, how are we to know if they are indeed having a positive impact?

    Last month, the Social Investment Forum sent a letter to President Obama’s transition team, outlining a series of changes it believes are critical. In this letter, the SIF argues in favor of increased reporting requirements around environment, social, and governance issues: “We support required annual CSR or sustainability reporting by companies following the Global Reporting Initiative Guidelines (GRI) and believe it is time to require all companies to be more transparent on their ESG goals and performance.”

    If companies issued such reports – and, perhaps, if they were audited – would that address your concerns?

    The letter is here: http://www.socialinvest.org/pdf/Obama_Policy_Pri_2009.pdf

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