The Inadequacy of Corporate Social-Responsibility Programs

Companies are spending millions on small, piecemeal fixes while lobbying against regulations that would do far more.

Jim Young / Reuters

Some of the largest companies around the globe spent a total of about $20 billion on corporate social-responsibility programs in 2013. That seems like good news, but a new study suggests that such programs might be double-edged swords—small, piecemeal fixes the company implements while standing in the way of regulatory reforms.

According to a new paper authored by Jean-Etienne de Bettignies of Queens School of Business and David T. Robinson of the Fuqua School of Business at Duke, the money, energy, and influence used to push popular CSR programs would be better spent either radically altering the way companies operate, or allowing better regulation—which would theoretically prevent companies from becoming being bad actors in the first place.

In an ideal world, the paper says, governments would enact enough regulation to eliminate the labor abuses and environmental damage corporate programs are meant to mitigate. The prevalence of these programs is itself evidence that current regulations are too weak.

Why? Part of the problem is that the same companies that create and fund corporate responsibility programs also spend money lobbying against the very regulations that are needed. The paper cites a 2011 study that found that 95 percent of the largest 250 global companies had CSR programs, and nearly 30 percent of those firms also participate in lobbying, often for less regulation in the name of faster growth.

The current system allows some firms to benefit on both fronts: First lobbying for inefficient regulation that helps them maintain profits, then creating and managing corporate social-responsibility programs that engender goodwill from customers and society. Those programs do mitigate the company’s destruction— better than nothing—but, on net, probably not doing as much good as they seem.