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