WSJ: The Illusion of Corporate Social Responsibility


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.