Economics Society

CSR Is Great. CSR Is Awful. Who’s Right?

This morning I came across a puzzling article by Paul Levy (Senior Researcher, Innovation Management, at the University of Brighton), called “Conscious capitalism: how to make the most out of the kindness in business.” In his piece Levy argues that companies need to do more than adopt Corporate Social Responsibility (CSR) agendas and programs. Levy says that while CSR as somewhat useful in understanding the corporation’s role in society, all too often these programs are “engulfed by traditional ways of running a company.” It’s better, he says, “to look at how we can create an organisation which runs along entirely different lines.”

images-1The answer to this CSR dilemma, claims Levy, is something called “Conscious Capitalism,” an idea promoted by John Mackey, the founder of Whole Foods Market. As Levy notes, Conscious Capitalism “represents an ideal of benevolence and goodness, and has been the starting point for those wanting to build the idea of a conscious business, where values (and CSR guidelines) define business interactions and act as an antidote to greed, corruption and social irresponsibility.” So if I read it correctly, being a “conscious” business is an “antidote” to terrible corporate practices.

What exactly does it take to be a conscious business? Unfortunately, Levy does not make that very clear in his piece, but it seems to have something to do with being organized in a more “democratic” way:

Well, there are companies organised along more democratic lines and who operate using open and enquiry-based methods rather than top down, solution-based ways of working. Firms like Nixon-McInnes and Propellernet in the UK are demonstrating new ways of being successful.

Nixcon-McIness, voted one of the world’s most democratic companies underlines the importance of creating responsive, enquiry-based relationships with clients, rather than the take-what-you-get traditional delivery-based model. It isn’t what we want to sell them, it is what they need. One process (called, rather strangely “SPIN” by Nixon McInnes founder, Tom Nixon), aims to arrive at a genuinely open conversation between customer and supplier, ferreting out the problems that the customer is really trying to solve. So, a conscious business attempts to raise its awareness of its customers by banishing traditional selling in favour of “sensing” and “responding”.

Aparently, “sensing” and “responding” are much better than “selling.” Moreover, creating a sense of inclusion, if I may borrow a CSR term, for all employees is another key to being a conscious corporation:

…Feeling part of the decision-making process as well as feeling safe to challenge are keys to a business remaining conscious. Of course, in both cases there are still dynamics that can create tension and difficulty around ownership, politics and commercial pressures. Both Propellernet and Nixon McInnes would see conscious businesses an an aspiration rather than an arrival point. In a way conscious business is not an end state but an everyday enquiry into how business is conducted.

The sense and respond cycle, then, is corporate consciousness, concludes Levy, and this is the highest state for a business to achieve — it’s a kind of corporate nirvana:

Conscious businesses are more conscious because their core business process is a real time readiness to sense, enquire and respond. This is more successful when both the internal and external environment are changing rapidly. We become more agile because we are enquiring all the time. Action becomes simultaneous to that enquiry, it doesn’t happen “after the fact”. (So, we decide and enquire at the same time). Simply put, a conscious business is highly responsive and able to improvise – a worthy goal for any CEO, in retail, in banking or any other sector.

Levy’s article is yet another attempt to add a social, in this case almost spiritual, agenda to the corporation, a profit-seeking organizational mechanism whose roots stretch back into antiquity and which began to take form in Europe in the 1600’s. For four-hundred years or so, the corporation was a way for investors to pool resources and to take on risk for the purpose of making money. In the late 20th century, this traditional purpose was undermined by terrible events such as the Bhopal disaster in India and the Exxon Valdez oil spill in the U.S. From those events arose a movement to give the corporation a social, as well as economic, mandate, and it’s those efforts that have more or less coalesced into what is called CSR today. Levy seems unsatisfied with CSR, and so suggests a concept even more abstract and removed, consciousness, as the way to rethink the role of the corporation. Reading Levy’s piece reminded me of another, very different piece, by the UK libertarian author, Phil Mullan, in which he rails against CSR.

Mullan, who would make a lively debate partner for Levy, pretty much hates anything to do with CSR and, in fact, anything that takes a corporation away from its core economic purpose. As he notes:

What all these essential truths about doing business in market economies mean is that anything that distracts or get in the way from this business focus will eventually be detrimental to the prospects for success and survival. CSR is just such a distraction, imposing goals other than commercial success on a business. A business that takes on responsibilities other than sustainable profitability dilutes the prime focus on its commercial responsibilities and goals, and therefore detracts from achieving its primary business objective of durable success. CSR advocates are very keen to talk about ‘purpose-driven’ business, but their efforts are actually undermining the very purpose – making particular goods and services profitably – that a business needs to be successful.

Millan’s critique is not just that CSR is a distraction, which would be bad enough. He also argues, cleverly, that it is also a form of self-regulation:

CSR also encourages and invites the more extensive and intrusive regulation of business – whether in the form of voluntary self-regulation codes of conduct or statutory rules – and we already have too many of both inhibiting business focus. Through ideas and moral pressures and codes of conduct, CSR is reinforcing the existing barriers getting in the way of business progress and survival.

In the end, Mullan thinks that CSR, rather than making companies think more clearly, clouds their vision with unnecessary, and potentially harmful, distractions:

The problem with adding extra social responsibilities, and resulting accountabilities, for business becomes more explicit with the notions of ‘stakeholder capitalism’ and of the ‘triple bottom line’. Both add to the fuzziness of what a business is supposed to be doing, and detract not only from a business’s focus, but also from it even being aware that it may have lost its proper focus. Stakeholder capitalism argues that businesses have shared responsibilities to people other than their owners or investors. As well as this group – its shareholders – businesses are supposed to have responsibilities to many other groups and interests, including employees, customers, suppliers, local community, local environment, and, in some versions, to the ‘global community’ and planet Earth. 

Moreover, he especially dislikes the idea that man CSR advocates try to claim, which is that, in the long if not the short term, CSR is good for business:

…the idea of a specific business case for CSR, that ‘Good Business’ is good for business and consistent with profitability, is a cop-out. Such defensiveness is not an adequate defence against the encroachments of the CSR doctrine. The core premise of CSR is that business has wider social responsibilities that transcend the primacy of profitability. CSR establishes the wellbeing of society, rather than the interests of its owners and profitability, as the primary concern of a business. It’s no answer to argue that there is no conflict, because in too many cases there obviously is.

In the end, Mullen simply sees no place for CSR or a CSR-like idea like “corporate consciousness:”

Giving moral authority to businesses to adopt values-based agendas for society is anti-democratic, it distracts businesses from what businesses were set up to do, and it thereby risks undermining the positive social impact business can have in making social and economic advances for society. It also panders to the populist business-bashing that is distorting and hampering much-needed analysis and debate about what are the real roots of today’s economic malaise across the Western world.

So who is right? Is it the CSR advocates who make corporations spend millions on CSR programs and reports, often with only the vaguest of business logic or financial analysis to support their agendas? Or is it the anti-CSR crusaders, who argue that a corporation has no mission but to make money for its shareholders and that any other agenda reduces the economic and (by their strict definition) social value of the corporation?

To be perfectly transparent, my personal tendencies lean toward Mullen’s position, but I also believe that the age of the purely economic corporation is gone forever, precisely because the titans of “Corporation 1.0″ destroyed it through events such as Bhopal, Exxon Valdez, and, more recently, the Macondo spill in the Gulf of Mexico and the Rana Plaza massacre in Bangladesh. These horrors were so profound that society demanded a “Corporation 2.0″ model and that is what CSR advocates, and those like Levy who want a kind of CSR+, have been trying to define and create. Unfortunately, their efforts have been, for the most part, intellectually weak and lacking in economic rigor. I, for one, have not come across a solidly argued, economically modeled, case for a CSR agenda either in the academic or corporate sphere. That is not to say I have not come across well-intentioned and well-reasoned CSR programs; it is to say that no one has yet taken the individual strands of CSR goals and policies and brought them together into a unified concept for a “second-generation” corporate model that is as focused and logical as the first. John Elkington tried do this back in the ’90’s with his “Triple-Bottom Line” concept, but the idea was not fully developed nor has it been successfully implemented (at least not according to the sustainability experts with whom I have discussed this concept). (1)

Perhaps the lack of progress in evolving ideas such as CSR and TBL is due to the fact that so many economists are, like Mullen, still fighting the ideological fight to save Corporation 1.0, and this position is hurting the evolution of CSR into a real discipline with a sound economic foundation. Maybe instead of the ideological war, they should be focused on creating the Corporation 2.0 model to address society’s real and valid critiques of Corporation 1.0, all the while keeping the CSR-advocates honest about what the real costs (higher than they want to admit) and benefits (lower than they want to accept) of the structural and philosophical evolution for which they advocate.

In the end, for more conservatives thinkers, it’s tempting to dismiss ideas like corporate “consciousness” as quixotic attempts to make CEO’s “think socially.” It is also tempting, for more progressive minds, to dismiss the arguments of the anti-CSR brigade as antiquated, even reactionary, attempts to preserve corporate power. But both conclusions would be wrong. The corporation must and will evolve in the 21st Century, but it will not do so through the vague maxims of today’s CSR programs. It will do so only when serious thinkers put together a new definition and economic foundation that will evolve the corporation’s social dimension in such a way that it incorporates the new pressures and responsibilities its current status provides with its traditional, and still primary, economic function.

(1) Interestingly, TBL continues to resonate as a concept in corporate circles and may well be worth revisiting.

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  1. Thanks for the thinking you have done.

    I have two thoughts.

    Firstly, I am not quite sure what you take consciousness to be? For you, does it mean ‘conscience’ perhaps? Conscience business?

    My second observation about all this is that many people seem to be discussing these things as if only cognition will give us an answer. This is understandable given the way many business people tends to use thought to the exclusion of their other abilities.

    I think human beings have hearts as well as minds. And I think we may need to find ways to engage both before we will start to resolve the dilemmas you point to.

    I would be interested in your response.



    1. Hi Pete:

      The term “conscious business,” as the post notes, is not mine but comes from people like Paul Levy and John Mackey. Their intent is to instill a corporation with sentience, i.e., the ability to sense and respond. Of course, this effort to anthropomorphize corporations is not unique to them (the “Citizens United” Supreme Court decision in the U.S. is a notable example). I do not personally distinguish between “hearts” and “minds” (they are one and the same to me), and I certainly would not agree that corporations do or should have a heart either. However, I do understand that since many people feel powerless to go after individual CEO’s and other executives, their recourse seems to be to treat corporations as humans. My preference is to treat the corporation for what it is — a legal construct for value creation with no more human qualities than a piece of paper — and focus on the people who run them. These individuals are clearly conscious (whether they have a conscience or not is another matter) and need to be praised when they do good and held accountable when they break the law or harm others.

      Liked by 1 person

      1. Hi Carlos

        Have you actually read John Mackey’s book, Conscious Capitalism? I don’t think he anthropomorphises business. I don’t think it is about he is about that at all.

        You are right some people do, but I don’t think John does.

        I think the idea of a business as ‘conscious’ is an interesting metaphor, but I think I agree with you – there is no such thing as a business – other than a legal construct. What is important is how the people who make up a ‘company’ (I believe the root of the word company is to do with eating bread together) behave.

        Conscious business and conscious capitalism I think are often referring to how people within companies behave. That doesn’t just mean how they ‘perform’ – which is sometimes how human behaviour is considered (as in ‘we must increase our performance’).

        It also means whether our behaviour is ‘congruent’ (to use Carl Rogers term) with all aspects of ourselves (heart and mind) and whether it is appropriate within the many groups of which we are part (responding to all stakeholders, perhaps including our fellow citizens of our planet).

        The reason the word ‘conscious’ is useful I think is because it draws attention to our perhaps unique ability to reflect upon our own behaviour and update it based on what we perceive (what sociologists call being reflexive, or what psychologists like Argyris and Schon called double-loop learning.)

        Some people don’t think too much about the word conscious and assume it means conscience or ethics or some such thing. But I think it is worth asking what it might mean in this context, and what it might mean in confluence with the word business.

        And whether if we become more ‘conscious’ of our behaviour we might be able to improve it – for example, to avoid the disasters you mention.



      2. Hi Pete:

        I appreciate your nuanced and balanced reply. I agree that asking all of us in business “reflect upon our own behaviour and update it based on what we perceive” is a good thing. My only issue is with those who forget that the term “conscious business” is indeed a metaphor and so build their theories around the idea that the corporation has moral obligations (and sometimes forget the men and women who run them). In other words, I would prefer a push for “conscious capitalists” rather than “conscious capitalism.”

        On this note, it’s fascinating to note that the U.S.’s government’s reaction to the subprime crisis was to focus on fines and financial penalties on corporations (something which I oppose on the grounds that it harms shareholders and innocent employees), while largely ignoring individual prosecutions. This is a very negative, and probably unintended, consequence of the “corporations are beings” school of thought. The men and women who unleashed the Great Recession through fraud and criminal acts (all well-documented in books like “The Big Short”) should be in prison. Most are not, which means that the next generation of crooks will just assume that their corporate entities will suffer the damage if they commit gross fraud.

        In short, while I accept your valid point that some thinkers in the “conscious capitalism” movement understand the distinctions between people and corporations, I personally prefer to limit talk of ethics, morality and consciousness to people. Let people reap the rewards of humane, conscious management, and let people suffer the consequences of criminality and unethical behavior.

        Cheers, Carlos


      3. Hi Carlos,

        I completely agree with you on that.

        Some might say that the idea of a corporation as a being is simply a way of people avoiding taking personal responsibility, in a way that is sometimes quite scandalous, and in the medium- and long-term problem unhelpful to everyone. As you say it encourages the wrong kinds of behaviour.

        ‘Limited’ liability seems reasonable – I think we need something that encourages risk taking when people group together to start something new. But with the big corporation we don’t just see limited liability – we seem in the cases you cite to be seeing a complete ‘absence’ of liability (or even sometimes the reverse – people are rewarded for terrible behaviour).

        It sometimes seems like a case of the system allowing the rich to get richer, and the powerful to get even more powerful – to a harmful extreme.



  2. You are quite right, Pete. In it’s original conception the corporation was indeed a way to limit financial liability, but over time it also became a way to limit social and (now) even criminal liability. Once that last line was crossed, of course, powerful interests reinforced these protective structures until we reached the absurd point where the U.S. Supreme Court decided that corporation have Constitutional “rights” such as free speech. I am glad to say that, in the U.S. at least, the consensus is that this was a ridiculous conclusion, and I hope that the anger at this decision leads to a serious roll-back of this trend.

    Corporations can and should be a way for investors and managers to obtain reasonable protection from the common and ordinary risks of running a business. They should never allow, as you note, the “powerful to get even more powerful.” That is not in the interest of the corporation, capitalism, or society.



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