WSJ: The Illusion of Corporate Social Responsibility

Published on August 24th, 2010 | by

WSJ

In a WSJ op/ed entitled The Case Against Corporate Social Responsibility,” University of Michigan strategy professor (Ross School of Management) Aneel Karnani argues that CSR fails when it is not a by-product of profit maximization. Karnani goes deeper to note that there exists a grave fallacy in CSR investment when a business model is not in synch with social welfare activities. Moreover, if large companies cannot find material business drivers for CSR, the world is potentially harmed by a reliance on ineffective agents to produce social progress.

“The danger is that a focus on social responsibility will delay or discourage more-effective measures to enhance social welfare in those cases where profits and the public good are at odds. As society looks to companies to address these problems, the real solutions may be ignored.”

Karnani believes CSR programs must be aligned with shareholder interests (profit) and consumer demand (profit with potential social welfare maximization elements). He cites fuel-efficient cars and healthier foods as examples of such sweet spots.

The professor is correct, if unpopular, to cast a critical eye on the efficacy of CSR in instances where companies pursue social welfare strategies that veer away from their core competencies. Not all companies need a carbon reduction commitment. And yet, more large companies should prioritize their social responsibility programs where their sphere of influence and business model can yield the highest social returns to scale.

The Ross School hosts the 2010 Net Impact Conference, so there certainly needs to be room for healthy debate on how to make CSR material, rather than a perfunctory indirect business unit.


About the Author

A lifelong conservationist, angler, gardener and writer, Lane is a Corporate Responsibility strategy consultant based in Chicago, where he currently works a CR consultant for PricewaterhouseCoopers (PwC). Prior to joining PwC, Lane was a global sustainability performance and stakeholder engagement specialist for Sodexo North America. He has experience in microfinance program evaluation at Grameen Foundation. A former President of the Net Impact Chapter at the University of California, San Diego (UCSD), Lane has a master's in International Development Economics from the School of International Relations and Pacific Studies at UCSD (IR/PS) and a bachelor's in history and international studies from Kenyon College. Prior to working in the sustainable business sphere, Lane spent six years as a communications and marketing professional focusing on arts and culture in New York City, where his work included the creation of the jazz website gothamjazz.com and serving as the publicist for the New York Philharmonic.
  • I agree with your assessment. It’s hard for some to hear that CSR, especially philanthropy, need to be aligned with corporate competencies. That’s not to say, though, that CSR should only be a marketing initiative. The work of IBM comes to mind as a good way to do things.

  • I agree with your assessment. It’s hard for some to hear that CSR, especially philanthropy, need to be aligned with corporate competencies. That’s not to say, though, that CSR should only be a marketing initiative. The work of IBM comes to mind as a good way to do things.

  • I rather enjoy the irony of Ben & Jerry’s preaching Social Responsibility, while selling me a product that’s high in sugar, fat, calories, and cholesterol. How are they any different than McDonalds? CSR is all marketing.

  • I enjoyed reading your response to the WSJ Op-Ed. I subsequently exchanged emails with Prof. Aneel Karnani. He sent me his original working paper and we debated his assumptions. It became evident that we diverged on our definitions of CSR. Whereas strategic CSR is generally understood to align with business objectives, Dr. Karnani refers to this not as CSR but what he terms “fiscal responsibility to take into account social issues in developing firm strategy” which maps with his zone of opportunity. He further mentions that “Social responsibility would require the firm to act in accordance with social issues even to the detriment of fiscal objectives,” which may have been the case at one point but no longer holds true.

    To address the concerns of our clients, we also published our own “Case for CSR” on our website at http://www.inspired-catalyst.com. Based on the other blog responses I’ve seen, I would venture to guess that, rather ironically, the WSJ article has done more to advance CSR (by raising it for debate and challenging its assumptions) than it has to undermine it.

  • I enjoyed reading your response to the WSJ Op-Ed. I subsequently exchanged emails with Prof. Aneel Karnani. He sent me his original working paper and we debated his assumptions. It became evident that we diverged on our definitions of CSR. Whereas strategic CSR is generally understood to align with business objectives, Dr. Karnani refers to this not as CSR but what he terms “fiscal responsibility to take into account social issues in developing firm strategy” which maps with his zone of opportunity. He further mentions that “Social responsibility would require the firm to act in accordance with social issues even to the detriment of fiscal objectives,” which may have been the case at one point but no longer holds true.

    To address the concerns of our clients, we also published our own “Case for CSR” on our website at http://www.inspired-catalyst.com. Based on the other blog responses I’ve seen, I would venture to guess that, rather ironically, the WSJ article has done more to advance CSR (by raising it for debate and challenging its assumptions) than it has to undermine it.

  • I just wrote a blog post in the CauseCast Cause Integration blog in response to Prof. Karnani’s WSJ wrong-headed article against corporate social responsibility. Please read my post, and then let’s connect! Email me at aurenkaplan@causecast.org, it would be great to establish a cross-post collaborative relationship.

    Here is the post link: http://www.causeintegration.com/2010/the-cases-for-corporate-social-responsibility/

    Best,
    Auren Kaplan
    http://CauseIntegration.com
    http://CauseCast.org

  • I just wrote a blog post in the CauseCast Cause Integration blog in response to Prof. Karnani’s WSJ wrong-headed article against corporate social responsibility. Please read my post, and then let’s connect! Email me at aurenkaplan@causecast.org, it would be great to establish a cross-post collaborative relationship.

    Here is the post link: http://www.causeintegration.com/2010/the-cases-for-corporate-social-responsibility/

    Best,
    Auren Kaplan
    http://CauseIntegration.com
    http://CauseCast.org

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