Are we entering an era of false pledgicism?

We delve into the history of Corporate Social Responsibility (CSR) and take a look at examples of companies that have done well to adopt ethical practices, as well as those that have been on the receiving end of reputational damage.

The history of Corporate Social Responsibility (CSR)

The history of Corporate Social Responsibility (CSR) is actually one that spans over two centuries; but we only really started to see companies realise that they had both a moral and social responsibility to their stakeholders, society and the environment in the twentieth century. The concept of a ‘social contract’ between businesses and society was born in the 1970s and over the years CSR, as a management concept, has been slowly adopted by companies looking to take ethical and responsible action beyond simple compliance with laws and regulations.

Despite the fact that individuals and nations differ in the values or beliefs they hold and the experiences that shape those values and beliefs, we are increasingly seeing that some fundamental ethical principles do transcend cultures, time and economic conditions.

In addition, with the evermore connected nature of advances in the world such as in ICT; more and more people can see what businesses are up to and develop an opinion on such activities. This has been magnified by the internet and social media and as such businesses are being held accountable by the masses; there is an increasing pressure for businesses to behave ethically and responsibly.

Nowadays, CSR based pledges to such areas as racial and social justice and environment and sustainability commitments have become common business practice, being incorporated into business strategies to gain competitive advantage; it is now an expectation from stakeholders, including employees, whereby we see millennials and Gen Z increasingly wanting to work for employers committed to values and ethics.

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Companies who have adopted ethical practices well

A good example of a company that has been hailed for doing this well are Starbucks; they have practices from ethical sourcing of their coffee beans and teas, to paying tuition fees for their employees to help them further their education. They have a strong standpoint on diversity and inclusion and have clearly put a lot of thought into meaningful strategies that give back to the communities and environment around them. This, in turn, has won them favour in the eyes of their stakeholders.

Reputational damage from perceived unethical business practices

In 1996 Nike was exposed for appalling working conditions in their sweatshops in Pakistan with extremely low wages and child labour. Whilst the rest of the world reeled in disgust at such unethical practices, others argued that, relative to national Pakistan, the salaries were high and this was indeed a sought-after place to work locally.

While it’s debated whether Nike’s slave labour scandal was an example of a poorly constructed global strategy or the world misunderstanding local nuances and what is acceptable in different areas, what is for sure is that this caused long-term reputational damage and Nike have had to work hard on their ethical strategies to recover from the blow.

There are some more recent examples of large corporations making strong statements and commitments that seemingly are not being followed through.

Are the big names in oil really on their way to a clean energy transition?

The pledges we now see company after company commit to are all very positive and seemingly a step in a better direction towards a healthier world but are we actually being swindled on false promises? If we look at the leading oil companies Shell, BP, Chevron, ExxonMobil it is not reassuringly clear that they are moving in any visible direction towards a clean energy transition.

A study from Tohoku University and Kyoto University examined the four major oil companies to “comprehensively investigate the actual state of actions by oil majors to decarbonize and transition to clean energy.” The results are scary. After twelve years of quantitative and qualitative data from the companies, there is no real alignment between their words and their actions. If these corporations were truly investing in clean energy at a rate that would allow them to shift away from fossil fuels, they are way off schedule and there is no evidence to show they are even doing so.

The study showed that, shockingly, ExxonMobil generated no clean energy during the decade, BP’s global renewables capacity—the largest among the four majors—amounts to only 2,000 MW or the equivalent of about two large gas-fired power plants.

All four companies repeatedly speak in a language we want to hear, using terms like “transition,” “emission” and “low-carbon energy” but their actions are showing a very different story.

Will things ever truly change?

From where we were when the concept of the “social contract” between business and society was declared by the Committee for Economic Development in 1971, to where we are now; the appetite for change has grown dramatically but there are still those riding the wave of status quo. The reason? Money of course! Whilst there are still large amounts of money to be made in certain industries such as oil, change will be slow and it won’t be going anywhere any time soon. The fact that conversations are being had, commitments are being made, actions taken and companies are being held accountable; change is inevitable but the race against the clock is well and truly on.