What Does CSR Have To Offer In A Recession?

It was an easy prediction to make: that the recession would end talk of corporate social responsibility. Faced with the fear, or reality, of losing their markets, companies would concentrate on saving themselves rather than the planet.

In such a context, does this leave CSR dead or alive? The name is surely dead: many dropped the “social” some time back, regarding it as either too vague or too limited, leaving just “corporate responsibility”. If we are heading for harder economic times, many companies will feel tempted to drop “corporate responsibility” too, and concentrate on shoring up profits.

Profit, in good times and bad, is where any discussion of companies’ responsibilities should start. Without profit, there is no future for shareholders, employees, customers and suppliers. However, engaging with the community in the pursuit of profit has its place: indeed, it is essential.

Companies cannot thrive in collapsing societies. Without political stability, the future of business is grim: look at Kenya or, worse, Zimbabwe. Stability has many components, but prosperity is one of the more important. The more people have to lose, the greater their interest in social peace. For companies, supporting education, entrepreneurs and good nutrition is more than philanthropy: it is money well spent. This, as Peter Drucker well described it 20 years ago, was the real social responsibility of business: the alchemy of transforming social need into ‘economic opportunity and economic benefit, into productive capacity, into human competence, into well paid jobs and wealth’.

However, when it comes to making a profit in a recession using a CSR strategy, what are the opportunities out there for businesses right now? With the current collapse of the economy in wealthy countries like the US, it has become more obvious that emerging markets represent one opportunity not to be missed. In this sense, the sustainability — and economic future — of businesses depend largely on their capacity to open up and adapt to those emerging markets. Not only does it make business sense, but investing in emerging markets, like Asia for example, may also help prevent the next crisis, by boosting local economies in an ethical way and bridging the gap between rich and poor countries in the long run.

Initiative, like micro-finance, could well represent the future of responsible business, in that it primarily aims at helping poorer countries become economically sustainable.

And in doing so, large companies are effectively building a whole new customer and suppliers base for future business.

Certainly there are profits to be found in helping solve society’s big problems. Cutting energy consumption is not just a demonstration to suppliers, workers and ordinary people that the company takes climate change seriously. It is also a way to improve profit margins.

This is the key to companies’ stubborn adherence to corporate social responsibility. They have worked out how to make it pay. Many of their initiatives help to cut costs or sustain supplies. They allow customers to continue to regard themselves as ethical during difficult times. They also help the companies to improve their public reputations at a time when business is widely held to be responsible for the downturn.

One remarkable example is Wal-Mart, in how well they manage their commercial relationship with suppliers. The company persuaded a toy supplier to reduce its packaging. This resulted in the company using 497 fewer freight containers a year and saving $2.4 million. Wal-Mart also has commercial reasons for its stance. The company has been encouraging companies to cut down on packaging. This enables it to fit more goods into each delivery truck, not only reducing its emissions, but also cutting the amount it spends on fuel. Its insistence that manufacturers produce concentrated laundry detergent has allowed it to save on both packaging and shelf space. Cost-cutting is vital to beating the downturn, and if companies can boost their green credentials at the same time, why not?

You can call that cost-cutting, or you can call it sustainability. It does not really matter what you call it: being alert to business threats and opportunities, wherever they come from, will not go out of fashion.