Can corporate social responsibility survive a recession?

In  2009, in the throes of a global recession, I interviewed John Elkington, one of the pre-eminent experts on corporate social responsibility, to discuss how the CSR movement would be impacted, and whether a focus on company proftits would put social purpose on the backburner. With the COVID-19 pandemic threatening to once again send the world spiralling into a deep recession, it's a good time to revisit the conversation and re-examine what a global downturn could mean for CSR.

Described by Business Week as "a dean of the corporate responsibility movement for three decades", John Elkington is arguably the leading (energy efficient) light in CSR. He originated the term 'triple bottom line', founded think tanks/consultancies SustainAbility and Volans, and has authored an extensive list of books on the topic.

These include The Green Capitalists: Industry’s Search for Environmental Excellence (1987), The Green Consumer (1993), The Chrysalis Economy: How Citizen CEOs and Corporations Can Fuse Values and Value Creation (2001) and The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World (2008).

If there’s one thing that Elkington knows – apart from how to write a very long book title – it’s corporate social responsibility (CSR). And as you would expect, he is keen to emphasise the important contribution that modern businesses need to make to society.

“A proportion of consumers will always make the ‘right’ decisions, in whatever area of social, ethical or environmental concern, but most will not,” he explains. “Governments cannot abdicate their responsibility to drive market change (as they did in areas like getting substances such as chlorine, CFCs, mercury and lead out of a broad range of industrial products). And business has a responsibility to help governments respond in timely, efficient and effective ways.”

During the two decades that Elkington has been writing about this concept, we have witnessed an extraordinary revolution in mindset. Public awareness of global issues such as sustainability has grown substantially, whilst businesses have started taking their social role with greater seriousness, with Elkington pointing to the emergence of proactive, positive business lobbying groups like the US Climate Action Partnership as an example of this. Nevertheless, there are clouds on the horizon.

“The CSR agenda developed huge momentum in recent years, for which we should be grateful,” he says. “Leading companies addresses issues, engage stakeholders and report on their performance in ways that would have seemed almost inconceivable in the previous decade. At the same time, however, at least three factors serve to undermine further progress: most obviously, there is the economic downturn, which is squeezing appetite and budgets for change; secondly, the CSR agenda has also sprawled ahead of the capacity of many companies to decide coherently on what is financially significant or ‘material’; and finally, huge numbers of companies, particularly in emerging and developing economies, are as yet untouched by all of this.”

As a business strategy, CSR is no stranger to abuse, and it has frequently been dismissed as little more than a PR exercise for many firms, who have been accused of bolting it on to an otherwise unchanged business model. But the economic climate seems to have given extra impetus to those inclined to write it off, with some questioning its viability in light of the tighter financial conditions. So is CSR really dead?

Retailer pressure

The first thing that Elkington emphasises is that whilst there are many companies that remain untouched by the issues relating to CSR, it can suddenly catch them unawares. Even beyond the moral and ethical epiphanies that can occur, and even the realisation of the pressures of corporate sustainability (which Tim Kitchin discussed here), businesses can still feel the squeeze. In particular, Elkington points to Wal-Mart’s decision to demand that its suppliers to measure their carbon footprint and reduce it, and Marks & Spencer’s efforts to reduce its supply chain’s CO2 emissions.

“The globalisation trend has exposed a much greater spectrum of supplier companies to these sort of issues, for example through the evolving specifications of retailers like Wal-Mart or Marks & Spencer,” he explains. “When a key customer decides to drive change, it can act much faster than most governments – which has been a considerable shock to many companies that felt they had plenty of time before the agenda caught up with them.”

And of course there are also reputational pressures at play. Businesses that pull back from CSR run the risk of having their activities labelled as opportunistic, and being accused of ‘greenwashing’ their image. In days of increasing transparency of operation, and empowered, socially connected consumers, this can have serious implications for those that fail foul of the public’s moral barometer.

“In an increasingly transparent world, even if it tends towards multi-polar forms of globalisation, the way in which business behaves in relation to environmental, social and governance challenges will be seen to be a key reputational issue – in some cases translating into significant market pressures. As issues like climate change, water availability, poverty and pandemic risks press in, business will have to get involved – if nothing else to ensure that government-led responses are reasonably business-friendly.”

Proactive talk

But, most importantly, Elkington is keen to emphasise that organisations don't have to sacrifice profits to be socially responsible. Financial stability and CSR strategies aren’t mutually exclusive, even during a recession - though Elkington does stress that it requires significant effort.

“Done badly, all of this dents the bottom line. The same is potentially true when nothing is done at all. But done well, and in a timely fashion, this can help both on the bottom and top lines,” he says. “This involves all the normal leadership and culture change challenges, but with the added wrinkle that a much more diverse set of stakeholders are potentially involved. Working out where to focus is key – and shifting from downsides to upsides is also critical, something General Electric has managed to do to good effect with its ‘Ecomagination’ initiative.”

So, plenty of reasons to still remain optimistic that even the most regressive of organisations will have to continue to take CSR seriously – even if it isn’t morally engaged. Nevertheless, Elkington concedes that the recession has had an impact on CSR. But he remains confident that organisations will keep it on the agenda – and that it will emerge stronger on the other side of the financial crisis.

“It has had a profoundly negative effect on traditional forms of CSR in some geographies, but it is also beginning to drive new thinking and innovation, which is desperately needed. We need to harness the real power of markets to drive transformational change, something that CSR has rarely done to date.”

And he encourages businesses that aren’t already converted, to join the CSR revolution. “Anyone who is undecided about their next steps in this area, ought to take a look at some of the key business websites, such as those operated by the World Business Council for Sustainable Development (WBCSD) or Business for Social Responsibility (BSR). They would be well advised to proactively talk to their key customers about the sort of B2B and B2C pressures and opportunities they see coming.”