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CSR can cloak irresponsibility

S A Aiyar, 25 July 2010, 01:15 AM IST

Corporate social responsibility (CSR) has long been a hot topic globally. Prime Minister
Manmohan Singh has lectured companies on it. Some corporations have won acclaim and
awards for CSR.

Two of them were BP, the oil giant, and Goldman Sachs, the big investment bank. But BP has
just created the greatest environmental disaster in history at its out-of-control Macondo deep-sea
well, ruining bird and marine life as well as the livelihoods of fishermen and beach hotels.
Goldman Sachs has just paid a whopping fine of $550 million for wrongful investment advice
that trapped its clients.

They are, rightly, being castigated today. But this shows how shallow the CSR concept is, and
how it can cloak cynicism and irresponsibility. Thomson-Reuters columnist Chrystia Freeland
has called CSR "a fetish encouraged by the philanthropies that feed off it, and funded by the
corporate executives who find that it serves their bottom line."Consumers have been willing to
pay more and buy more from companies with a CSR halo. Now they should know better.

CSR award-winners have typically engaged in green activism and philanthropy. British
Petroleum changed its name to plain BP, and launched a hugely successful image-building
campaign, labeling itself "Beyond Petroleum."This showed BP as a green activist, with a new
logo of a green and yellow sun. The company boasted it was among the biggest producers of
solar panels and wind power, but these accounted for barely 3% of its total business. "Beyond
Petroleum"won two "Campaign of the Year"awards from PR Week, and a gold "Effie"award
from the American Marketing Association. BP funded green causes and won green plaudits,
brushing aside accusations of "greenwashing"by Greenpeace.

Fortune magazine has an annual corporate accountability rating for CSR. BP topped the Fortune
list in 2004, 2005 and 2007, and came second in 2006. In 2007, BP China won the "The Most
Responsible Enterprise"award organized by China News Weekly and the Chinese Red Cross
Foundation (CRCF). It also won the Corporate Citizenship Award for Chinese enterprises
several times. BP won the 2007 Prime Minister's CSR award in Malaysia for aiding a turtle
sanctuary.
All this CSR was mere image-man ship by a company with a horrendous record of cutting
corners and neglecting safety. In 2005, a poorly maintained BP refinery exploded in Texas,
killing 15 and injuring 180. In 2007, a BP pipeline, corroded through neglect, leaked 200,000
gallons of crude into the pristine Alaskan wilderness. The company paid a fine of $303 million to
settle a charge that it had conspired to manipulate the price of propane gas. According to the
Center for Public Integrity, Washington, BP refineries in Ohio and Texas in the last three years
ran up 760 "egregious, willful" safety violations, while rivals Sunoco and ConocoPhillips each
had eight, Citgo had two and
Exxon had one comparable citation. So, BP accounted for 97% of all corporate refinery
violations.

Every year, the World Economic Forum lists the "Global 100 Most Sustainable Corporations".
BP has made the list many times. So has Goldman Sachs, for its work on climate change and
carbon trading.

Goldman Sachs won a social innovation award given by The Financial Times and others for its
famous "10,000 women"initiative. This provided 10,000 women entrepreneurs in 16 developing
countries (including India) with management and business education, wrap-around services and
access to capital. The scheme received high praise from independent observers. Seen by itself, it
was a great success.

Yet it had nothing to do with Goldman Sachs' core business. After the financial crisis of 2007-
09, many questions are being asked about financial institutions that made billions even as their
investors suffered.

Goldman Sachs was the superstar of Wall Street. Its top executives rose to powerful political
positions. Examples include Robert Rubin, Bill Clinton's treasury secretary; Hank Paulson,
Bush's treasury secretary; Neel Kashkari, Paulson's bailout chief; Reuben Jeffrey, interim
treasury investment officer; Stephen Friedman, head of the New York Fed; and Jon Corzine,
former governor of New Jersey.

Many observers complain that Goldman virtually captured successive governments, and
thwarted prudential measures that might have prevented the financial crisis. Seen in this light, the
10,000 women campaign was PR, not CSR.
Clearly the whole concept of CSR needs to be recast. It must be delinked from philanthropy:
after all, even the Taliban and Lashkar e-Taiba have well-functioning philanthropic activities.
CSR should really mean observing high standards in the core business of corporations, in dealing
with shareholders and clients and the communities they operate in. By all means let corporations
also make green and philanthropic efforts. But don't confuse these with social responsibility.
That will only encourage BP-style cynicism.

http://blogs.timesofindia.indiatimes.com/swaminomics/entry/csr-can-cloak-
irresponsibility

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