The challenges of answering “Does CSR matter?”

Good luck to a new research alliance looking at whether CSR can deliver competitiveness, jobs and environmental protection for EU policy makers. They’ll need it – their research has big challenges of definition and causation.

Yesterday I spent a day at the first stakeholder roundtable of the CSR IMPACT research project. The alliance of 16 universities and research institutions across the EU has 3 years to answer a simple question: does CSR matter? Or, as they put it:

  • what benefits and impacts does CSR actually bring beyond company borders to the economy and society at large?
  • How can managers, policy makers and stakeholders better measure and evaluate its impacts?
  • What does this mean for smart mixes of public policies and corporate strategy?

All of which is very laudable. Throughout the day I was struck by the immense challenges of definition and causation they face.

1. what is CSR? They chosen to use the European Commission definition, sensibly given they are the intended audience for policy recommendations. See if you can spot the problem with it:

the voluntary contribution of business to competitiveness, social cohesion, and environmental stewardship.

Well, the problems are legion. As Nobel prize-wining economist Amartya Sen says in The Argumentative Indian, ‘within the limits of feasibility and reasonable returns, there are substantial choices to be made.’ Isn’t very nearly everything a company does voluntary? Even with compliance, there many be many ways of complying with the law.

The researchers have tried to overcome this by creating a conceptual framework that proposes a combined definition and  causation: sustainability trends drive a CSR response (eg a motivation to do something about climate change), which drives a CSR strategy (“let’s do this”), which drives CSR performance in the firm (reduced carbon emissions, reduced costs), which in turn drives CSR impact on the rest of society (environmental protection).

But the problem of separating the voluntary CSR response from the involuntary response remains. You could take a narrow reading: the CSR strategy has to be called a CSR strategy at the time. But then you would miss out on lots of responses to sustainability trends that happen in the mainstream of the business without ever being labelled CSR.

Or you could take a wide reading: the CSR strategy is truly all responses to sustainability trends.  Then you’ve just changed the definitional challenge to ‘what counts as a sustainability trend?’ It could be everything the company does in response to an external stimulus. That would make CSR into good management. Good to have that validation, but not good if you’re trying to identify the particular impact of CSR.

2. what is competitiveness? A few years ago I published a booklet on sustainability and competitiveness for the ICAEW, Europe’s largest accounting institute. In the research I discovered that there is no agreed meaning for competitiveness. It is applied liberally for companies, cities, regions and countries but is very nearly meaningless. If you don’t believe me look at this FT article by renowned economist John Kay.

If you’re measuring a firm’s competitiveness, why not just measure its returns on investment or economic value add? If you’re measuring the competitiveness of a country why not just look at GDP growth? If you’re measuring the contribution of a firm to EU competitiveness, why not scratch your head a lot?

3. how prove causation? Finally, there is the challenge of causation. How can you prove that CSR has driven some aspect of corporate performance and that performance has created some direct impact and link that direct impact to a ‘meta-impact’ when your definitions of CSR and meta-impact are so fuzzy?

Obviously, the researchers are aware of these challenges. They may even overcome them. I’m struck that they will be reporting in March 2013. By then it will be 4 years since they first framed their research. An awful lot has happened in the last 4 years of CSR – not least, a shift to ‘sustainability’, not ‘responsibility’ (in my view).

As i say – good luck!

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