Moneymaker or not?
It sounds too good to be true: you pay your workers a living wage, avoid pollution, and treat developing nations fairly. And though these tactics will cost you money, you’ll still improve profit as workers, investors, and shoppers reward your social responsibility.
Yes, it is too good to be true, says business professor David Vogel in his new book, The Market for Virtue.
Proponents of “corporate social responsibility,” or CSR, point to businesses such as Smith & Hawken, the Body Shop, and Google as examples of companies that “do well by doing good.” But in his comprehensive history of businesses’ efforts to behave more morally, Vogel reveals doubts about how much CSR can accomplish.
“There’s a market for virtue,” he says, quoting the book’s title, “but there’s also a market for vice. Look at ExxonMobil. It spends almost nothing to prevent global warming,” unlike competitors BP and Shell. “And it has the best financials in the industry.”
Vogel’s skepticism has brought him the ire of business students, he says. And Kellie McElhaney, assistant professor at Haas and director of the Center for Responsible Business at the college, says the book is overly negative. She says there is research that shows CSR can help a business. But Vogel says CSR is a niche, not a universal strategy for success. Unless far more people and institutions let social responsibility guide their choices, conventional companies will continue to flourish. Vogel admits that “CSR has done more than I ever could have expected,” but he believes that some changes—unionization in the developing world, for example—will prove too costly.
Many corporations that have taken on socially responsible commitments, such as the Gap’s efforts to reduce its use of sweatshop labor, have done so in response to consumer pressure. Vogel says corporate responsibility advocates should focus on gaining corporate support for progressive legislation. For example, rather than pressuring an oil company to invest more in alternatives to fossil fuels, he thinks consumers should get the company to support the Kyoto protocol. By leveraging power into the political realm, consumers can change the behavior of many companies.
McElhaney agrees that it will take more than CSR to reform the world, but like many in the business community, she is wary of inviting more regulation. “Market forces tend to be faster drivers than regulations,” she says.
Neither scholar believes corporate social responsibility will go away. And while Vogel now analyzes European environmental laws, McElhaney works with executives and students to make incremental, profitable changes that improve the world and promote the market for virtue.
From the January February 2006 Chinafornia issue of California.