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Forget CSR: The profit motive is pure enough

By Paul Gilding - posted Wednesday, 16 March 2005


If the Australian economy goes into recession, not only will it end our long economic boom, it will also be the end for many corporate social responsibility programs, with companies slashing or eliminating them to reduce costs. That will confirm what a weak and ineffective concept it is.

People concerned about environmental and social sustainability would be well served by the death of CSR. It needs to be replaced by a far more market-focused approach, a more Darwinian sustainability that sees environmental and social trends as opportunities for growth and competitive advantage.

CSR, despite its emotional appeal, is and always was a bad idea. It's intellectually weak and doesn't work anyway. Sure, it encourages platitudes by business leaders but it creates precious little of lasting benefit to society and precious little real value for companies.

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The advocates of CSR in recent years have effectively acknowledged the latter. They argue companies should focus on "more than just profit" - they should care about the community, the environment, poverty and so forth. There begins the failure. If you're arguing companies should focus on something "extra" than profit, you're saying those extra things don't create profit. And in reality, many CSR programs don't.

The failure continues with a moralising approach ineffective in corporate culture, with companies graded for goodness. That's a familiar model - children everywhere are taught to behave themselves or else - only here it's applied to the grown-up world. Are you a "good" company (do you join the right organisations, do you sign the right sets of principles)? Do you go to church on Sunday (do you attend the right conferences)? Do you confess when you misbehave (do you publish reports pointing out your failings)?

I'm not against any of these things per se - not against going to church and not against publishing sustainability reports. Such activities focus our attention on important issues. But I don't want companies behaving responsibly out of moral guilt. This won't get companies to embrace sustainability with sincerity, let alone urgency or speed. I want companies to embrace sustainability because it will help them whip their competition. I want sustainability to be Darwinian.

What's going to be more effective at driving a company such as BP to invest more in solar? Activists criticising the company because its solar business is only a fraction of its oil investments or them getting faster growth in solar than in oil while providing a hedging strategy against climate change?

If sustainability is going to take hold in the corporate sector in a big way - and we need it to - it will be when it produces big profits and faster growth. It won't happen because of an optional executive commitment to an abstract concept. It will happen because sustainability is a great business strategy. And it is.

Employees, especially highly skilled ones, increasingly want to work for a company doing something socially useful - they want their work to matter. Attracting the best people, and having them highly motivated, drives growth. This is one reason sustainability is being integrated into business by service-based sectors such as insurance and finance.

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Smart companies take a look at emerging trends and see the writing on the wall. Even in George W. Bush's America, energy security and the acceptance of climate change is driving the market towards more efficient cars. That's one of the reasons Toyota's market share is increasing while Ford's and GM's are shrinking. The auto companies that work out how to drive the market in that direction, and how to ride that wave, will grow faster with lower risk.

This will apply in many different sectors, with the winners making more money - and good luck to them. I hope they rake it in. Those that fail to do so will fall by the wayside. Hey, that's what makes capitalism the cuddly creature it is. Winners win and losers lose. Creative destruction at work.

The world is going to transform around sustainability. In 50 years, we'll have cars that are safe and pollution-free, power stations on our rooftops, cleaner and healthier food, and cities that work (well, that may be stretching it a bit). If anyone tells you all this is going to happen because companies believe it's the right thing to do - tell 'em they're dreaming! It's going to happen because the most powerful institution on the planet - business - will take us there by combining relatively decent values with the pursuit of profit and growth.

Sure, plenty of today's companies don't get it. Many never will. We'll enjoy watching them decline into the rubbish bin of history and tomorrow's business-school case studies. I don't want to feel holier than them. I just want to see them go broke. Bring on the market and bye-bye losers.

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First published in The Australian March 8, 2005.



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About the Author

Paul Gilding is an independent adviser and commentator on sustainability and climate change and a Special Advisor to KPMG. Former roles include executive director of Greenpeace International, founder of Ecos Corporation and CEO of Easy Being Green. www.paulgilding.com

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