Bill Gates and the strengthening of CSR

Bill Gates and the strengthening of CSR

Rochman Achwan, Jakarta

For the past decade or so, Corporate Social Responsibility,
(CSR), has been a hotly contested topic.

Arguments for and against CSR strike at the core of what
business is; whether it integrates social and political demands
or sticks to the bottom line; the maximization of value for
shareholders.

Social scientists, bureaucrats, corporate CEOs, professionals
and activists have long been involved in this debate and it is no
wonder that international discourse is colored by conflicting CSR
paradigms.

Nowadays, this battle is largely controlled by the voluntary
CSR school, a paradigm that advocates self-regulation and
voluntary social responsibility. The Time magazine award of
Person of the Year to Bill Gates has strengthened and legitimized
voluntary CSR as a mainstream idea. So what is this blend of
social work and business? Can one interpret it as the rise of a
compassionate capitalism over its more greedy predecessor?

The rise of CSR began in the universities and courts of the
developed world -- primarily the United States -- as increased
economic liberalization created more multinational companies
working in poorer countries. Using the Alien Tort Claims Act,
American activists and lawyers began taking international
corporations to task for violating human rights in developing
countries by creating sweatshops and working alongside
oppressive, anti-democratic regimes.

While this caused extraordinarily negative publicity for the
multinationals targeted, most of the battles were not winnable
because the burden of proof was too high -- prosecutors had to
prove companies intentionally violated workers' human rights.

The prosecutors had wanted laws passed to force businesses to
act responsibly. Instead, businesses argued that these
international laws would be too costly and difficult to enforce.
They began promoting their own voluntary brand of CSR by
developing networks with states, non-governmental organizations
and aid organizations. This strategy worked.

By the close of the 20th century, the European Parliament had
tabled codes conduct for MNCs operating in developing countries.
The European Union, meanwhile, published a green paper for CSR
promotion, and the United Nations created the Global Compact
Initiative, exhorting MNCs to respect and promote human rights.

On the academic and business fronts, billions of U.S. dollars
are now pouring into CSR programs. Many internationally respected
schools of management have created professorships in CSR, and
there has been a mushrooming of groups big and small involved in
making the projects a reality.

Hundreds of contracting firms now audit and report corporate
social performance and create plans for corporate engagement with
communities in the form of community development.

However, while voluntary CSR seems here to stay, other voices
are challenging its cosy premises.

Those who remain suspicious of multinational business and
wish to regulate it more firmly, pour scorn on CSR programs,
saying they are too-often cosmetic measures designed to divert
attention from the continuing inequalities in the international
business world.

Meanwhile, a third conservative camp argues that CSR programs
go against the fundamental values of capitalism -- that
philanthropy and charity should not be the engine or the focus of
a modern corporation. The argument says, if you oblige corporate
business to run charities then you take out the jawbone and teeth
of modern capitalism.

This "let business be business" camp says CSR programs
unfairly disadvantage shareholders, who are entitled as owners of
the company to demand the best possible return on their
investment. Using examples of corporate programs gone wrong, this
school argues that corporations should not take over CSR
practices because they are essentially the domain of state
institutions.

Through their very existence, well-managed corporations
improve the social welfare of communities in their areas, the
conservatives say; what they call the "invisible hand" of
business.

Responding to these critics, the voluntary camp has developed
two management strategies -- CSR coupling and decoupling.

It is in this author's view that if both strategies are
adopted by a majority of modern corporations, there is no doubt
that the first decades of the 21st century will be marked by the
rise of compassionate capitalism.

It is the decoupling strategy that Bill Gates chooses when he
engages in CSR. By founding the Melinda and Bill Gates
Foundation, he separated CSR from his main business. By donating
US$27 billion, the foundation has engaged in a war to eradicate
malaria diseases in Africa.

The coupling strategy -- a reaction against the conservatives
-- takes CSR into the heart of corporate management. Equipped
with issues management that monitors social and political demands
and grievances, modern corporations innovate new products with
human rights and the environment in mind -- hence the birth of
environmentally friendly cars, and animal friendly cosmetics.

The CSR movement in Indonesia is still in its infancy and much
has to be done to drive it to the mature stage. However, it is
clear that with our weak and often uncaring bureaucracy, modern
corporations can play a vital role in local development.

The writer is an economic sociologist at the School of
Sociology, the University of Indonesia. He can be reached at
rachwan@indo.net.id