Corporate Social Responsibility or Profits: The Debate

In recent years, CSR or Corporate Social Responsibility has become the latest buzzword among the companies. This refers to the practice of the corporates in “giving back” to society in the form of programs that benefit the less privileged members of society. They can take the form of outreach programs that adopt schools; communities etc and provide funds for their upkeep as well as promote socially conscious business practices that lead to the betterment of society.

This article analyzes the statement, “the idea that the company’s resources should be devoted to some cause other than making a profit is outrageous”.

There is an ongoing debate over whether a firm should exist solely for making profits or whether it should pay heed to the social and environmental concerns that accompany the practice of Corporate Social Responsibility or CSR.

The proponents of the view that a firm exists solely for making profit argue about the market being the final arbiter of allocating resources and point to the market as the place where incentives for allocating resources for social and environmental causes is to be found. The opponents of this view take the stand that everything cannot be left to the market and there needs to be a mechanism in place whereby the environmental and social causes need to be taken care of.

If we examine both sides of the debate as well as take into account superficial attempts by businesses to pay lip service to CSR, the first strand of thought that comes to mind is about the need for businesses to invest in CSR as a way of mitigating the deleterious effects of the industrial paradigm on the environment.

The practice of CSR by industrial companies is in vogue these days because of the fact that they have contributed to polluting the environment.

As Martha Nussbaum contends, “If this world is to be a decent world in the future, “we must acknowledge right now that we are citizens of one interdependent world, held together by mutual fellowship as well as the pursuit of mutual advantage, by compassion as well as self-interest, by a love of human dignity in all people, even when there is nothing we have to gain from cooperating with them”

Hence, in this interconnected and flat world there is a need for concerted action by the businesses to take steps that would alleviate the pressing issues of the day. However, the opponents of this view are some of the multinationals themselves as can be seen from the following excerpt, “Thus the central theoretical and practical question in the discussion of corporate social responsibility is whether it remains a voluntary choice of the business or should be ensured through formal control”.

The point here is that CSR is being enforced rather than voluntarily embraced. This fact alone makes it clear that businesses by themselves do not contribute to CSR and that they have to be regulated to do so.