Corporate Social Responsibility: reinventing the meaning of development?

MICHAEL BLOWFIELD

In November 2004, NGOs and trade unions, primarily in Europe, joined together to call for the European Union to propose a new corporate social responsibility agenda. At the top of that agenda was the demand that CSR demonstrate its credibility globally, particularly in the developing country context.1 The statement is one of several indications that, for many, CSR is now intertwined with international development and the related goals of poverty alleviation and sustainability. How this connection is conceived gets expressed in a variety of ways, and there have been changes over time. For instance, in 1997 the British Department for International Development talked about CSR as a means to protect workers and the environment from the undesired consequences of the otherwise desirable fostering of international trade.2 Six years later the World Bank described CSR in much more positive terms as the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life, in ways that are both good for business and good for development.3 Both the interpretations of CSR quoted above are significantly different from previous thinking about the role of business in international development, namely that it serves as an engine for economic growth, the benefits of which will be felt by all. Nothing in this article is intended to detract from the fact that CSR has got people talking about worker rights, global governance, sustainable enterprise and all manner of topics that have relevance to the wellbeing of the poor and marginalized. But are business and development happy bedfellows? Part of developing a critical approach to CSR requires us not only to ask how CSR affects company behaviour in developing countries; it requires us also to ask if, and how, business is affecting the meaning of development itself. It is the latter issue that is at the heart of this article, which not only discusses the CSRdevelopment relationship, but sets out a list of questions that
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NGO and trade union statement at the European Conference on Corporate Social Responsibility, Maastricht, 79 Nov. 2004. 2 DFID, Eliminating global poverty: the challenge for the 21st century (London: HMSO, 1997). 3 www.worldbank.org/privatesector/whatwedo.htm, accessed 24 March 2004.

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Michael Blowfield development professionals can use in assessing their relationship with business. Let me say from the outset that I offer more questions than answers, and I provide more clues than solutions. I make no apology for this. Some supporters of CSR seem to argue that if one cannot provide an alternative then one has no right to offer a critique. For me, this attitude itself is an insight into the weaknesses of contemporary CSR, because not only does it discourage the kind of debate that is essential to addressing complex challenges, it puts CSR firmly in a mindset that favours solutions over analysis. In this article I will argue that business is indeed affecting development, and one of the ways this happens is by allowing business thinking to dominate the way we view the world, and to become the norm against which everything else is tested for true and false value. However, it is less than clear whether this is a good or bad facet of globalization. While some might object to the values of business being espoused as global norms affecting all social interactions, we are a long way from identifying alternatives. Civil society organizations, although they may use radical language, seem at best able to propose a reformist agenda rooted firmly in the norms of business management thinking and practice. But perhaps that agenda is sufficient. If companies shake off the legacy of certain economists, and admit that they have always needed to manage their relationship with wider society, and if others acknowledge the limits to what can be expected of business and its contribution to the public good, then it will be easier to see in CSR the moral vision of capitalism. Businesss contribution to development goals As other authors in this volume make clear, many feel that business was for too long left out of development thinking. Although western companies operated in developing countries, they were either ignored by development professionals or seen as problematic. Developing-country governments framed businesss role in terms of import substitution and nationalization; local entrepreneurs and politicians often eyed each other with mutual suspicion and resentment. There was tacit acceptance that the private sector would generate employment and contribute to government revenues, but it was rarely thought of as having a central role. That changed in the 1980s when the private sector was seen as the liberator of underdeveloped economies. Although the optimism of this economic rights view of business was subsequently tarnished because of exploitation of workers, communities and the natural environment, many basic features of the businessdevelopment relationship were defined at that time. International trade and investment are almost uniformly seen as crucial to development, and many public-sector development agencies have defined their role in terms of facilitating a policy environment favouring an easy and accelerating flow of goods, services and knowledge. I have heard similar thinking reflected in the remarks of some policy-makers who want to judge the success or failure of CSR on the basis of this type of economic indicator. A key consideration in

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Corporate Social Responsibility this context is how CSR affects foreign direct investment, which now far exceeds official development assistance but stubbornly avoids the poorest countries. Thus we have started to see a shift in thinking about CSR from being a way of ameliorating the worst consequences of foreign direct investment to also becoming a way of accelerating such investment, especially in the poorest countries. In some ways this reflects a wider phenomenon in CSR by which company involvement in social and environmental management is justified by its commercial benefits. There are pragmatic reasons for using financial arguments to promote CSR, both to business and development audiences; but this should not blind us to the risks involved in basing discussions about social and environmental justice solely on economic arguments. This is evident in the sorts of right recognized within CSR. For instance, the labour standards which are an increasingly common part of buyersupplier contracts in certain industries guarantee basic worker rights but implicitly accept the right of companies to lay off workers and close down facilities without compensation. Thus CSR offers certain basic protections to workers, but at the same time indirectly shields companies from any responsibility for the consequences of disinvestment. Furthermore, because labour standards and other similar tools widely used in CSR can be promoted as a voluntary alternative to state regulation and enforcement, there is a possibility that issues ignored by CSR will not be addressed in other ways. Indeed, because CSR typically has nothing to say about corporate taxation or active lobbying to influence the regulatory capacity of governments, it can be accused of being complicit with a de facto stifling of many spheres of regulation. This is not to reject all forms of voluntary regulation: the power relationships within modern supply chains can bring a significant new dimension to global governance, and have led to improved company performance in areas such as food safety, forest management and farming. However, as with all aspects of CSR, we need to view voluntary regulation in the wider context of how business is trying to influence national and international governance, and assess how far CSR challenges, moderates or opposes those trends. It is especially noticeable that, although accountability is central to CSR (see Rhys Jenkinss article in this issue), there is little sign that accountability is being extended to headline social development indicators such as employment, gender equity, income levels and poverty reduction. I will examine some of the reasons for this later on in the article. CSR has largely viewed developing countries as a resource producing items for affluent markets. Another way of looking at the businessdevelopment relationship is to see poor people as a marketing opportunity, and hence to talk about companies in terms of providing goods and services to the poor.4 This
4

See e.g. C. K. Prahalad, The fortune at the bottom of the pyramid: eradicating poverty through profits (New York: Wharton School Publishing, 2004); David Grayson, Corporate social opportunity (Sheffield: Greenleaf, 2004). Uncertainties about these theories are discussed in more depth in Rhys Jenkinss article in this issue.

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Michael Blowfield thinking is reflected in the product lines of companies such as Unilever and P&G, and the expansion plans of retailers such as Carrefour and Walmart that are opening outlets in developing countries. At CSR events in Europe and North America these trends are hailed as positive and have attracted donor funding. But until we know more about the consequences of multinationals entering markets previously served by local small and medium-sized operations we need to be cautious about such ideas and initiatives. We should certainly avoid the error made by CSR in the past of celebrating particular approaches before we have any real understanding of their impact. Developing countries relationship with business The presence or absence of international companies in a country can affect its development, but we should not lose sight of the fundamental fact that such companies engage with developing economies for commercial reasons, not developmental ones. Although there may be areas of overlap between development and business goals, it is important to understand where there are gaps and contradictions. It is worth reminding companies that their interests are not always at odds with those of development, but more important longer-term tests for CSR are (1) whether it can help companies redefine the meaning of good business practice in the interests of the poor and marginalized; and (2) whether it helps development practitioners manage the possibilities and consequences of global capitalism for poor countries more effectively. CSR has made progress in helping companies rethink their responsibilities and self-interest in the developing-country context. This has happened in part because power relationships between companies and investors, consumers, the media and civil society have been used to stimulate debate about how companies should relate to the poor and marginalized, and in part because various tools and models have been developed to manage social and environmental performance. So, for instance, the use of forced labour or hazardous pesticides by suppliers to major western companies was made public, and those companies eventually adopted codes of practice to regulate supplier behaviour. Although there has been much discussion about what companies should be responsible for and how they should manage those responsibilities, a consensus has emerged over some of the limits to companies permissible exploitation of developing countries competitive advantage. This can be significant for some communities, workers and natural resource endowments, but it is at best only a start in redefining business practice in the interests of the poor and marginalized. Although CSR is often described in terms of the rights it has forced companies to recognize, perhaps the biggest changes that have occurred are that vertically integrated companies are applying similar social and environmental standards in developing economies as in developed ones, while companies dependent on supply chains are taking responsibility for the social and environmental performance of their suppliers. In both cases, this sense of responsibility

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Corporate Social Responsibility is exercised above and beyond any legal requirements. This is an important shift in attitude and principles, and one that is still contested by the many laissez-faire economists and conventional management theorists. However, it also tells us about some of the limits to businesss view of developing countries and its preparedness to contribute to development goals. What CSR has to tell us about these possibilities and limitations is my next topic. The values of business meet the hopes of development A feature of CSR in recent years is the speed with which it has given rise to an orthodoxy that sets out what responsible behaviour looks like and how it is to be managed. Not everyone agrees with the codes of practice, guidelines, principles and systems that are held up as CSR best practice, but these elements are the ones which are used to test the value of any competing views. Moreover, although there is much debate about what criteria should be included in codes of practice or how best to conduct social and environmental monitoring, what is not disputed is the utility of codes and similar scales for measuring performance, or the effectiveness of auditing, reporting and other instruments rooted in financial management to bring positive development outcomes. Anyone familiar with contemporary western culture should not be surprised at this, because language and other aspects of daily life have been strongly influenced by business thinking.5 Yet many still talk about CSR in terms of its radical possibilities to change the way business is conducted and for whose benefit. Indications of these possibilities include making agreements to stamp out abusive labour practices, improvements in both the scope and methods of environmental management, and collaboration on preventing corruption. There have been important achievements, although there is little understanding about their actual effect on developing countries and their populations other than case-studies and a small amount of impact assessment work. This is a cause for concern, given the support for CSR by multilateral and bilateral development agencies, and especially considering the way certain approaches have come to be thought of as universally applicable best practice. Many of those interested in improving CSR concentrate on how to reform these approaches. For instance, there are strong arguments for extending the scope of codes of labour practice so that they better address the priorities of female workers, homeworkers and the large casual workforce.6 Likewise, there are calls to strengthen the legal framework affecting CSR,7 and to incorporate
5

Nigel Thrift, Think and act like revolutionaries: episodes from the global triumph of management discourse, Critical Quarterly 44: 3, 2002, pp. 1926. 6 See e.g. Michael E. Blowfield, Ethical supply chains in the cocoa, coffee and tea industries, Greener Management International 43, Autumn 2004, pp. 1524; Dena Freeman, Homeworkers in global supply chains, Greener Management International 43, Autumn 2004, pp. 10718; Stephanie Barrientos, Catherine Dolan and Anne Tallontire, A gendered value chain approach to codes of conduct in African horticulture, World Development 31: 9, 2003, pp. 151127. 7 See e.g. Halina Ward, Legal issues in corporate citizenship (London: International Institute for Environment and Development, 2003); Christian Aid, Behind the mask: the real face of corporate social responsibility (London: Christian Aid, 2004).

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Michael Blowfield stronger rights of redress (e.g. for workers) in CSR standards. These perspectives are based on the assumption that any weaknesses in CSR can be addressed by technical problem-solving, for instance through a more perfect taxonomy of workers and their issues, or through tougher laws and enforcement. Some reforms of this kind will be helpful, but they should not lead us into thinking that current approaches have infinite possibilities. The most clearly apparent limitations to the approaches typical of contemporary CSR relate to the fundamental values and tenets of the capitalist enterprise. These include the right to make a profit, the universal good of free trade, the freedom of capital, the supremacy of private property, the commoditization of things including labour, the superiority of markets in determining price and value, and the privileging of companies as citizens and moral entities. There is nothing new about these, and most are to be found in the works of Adam Smith, Marx, Keynes and Friedman as well as reflected in company law in much of the post-communist world. It is surprising, therefore, that so little is made of these basic values in the supposedly values-oriented world of CSR. Sometimes a companys CSR report will mention profitability among its principles, and more than one company has interpreted sustainability as meaning business viability. But attempts to redefine the purpose of business outside these principles have met an early death, as happened in discussions by the British governments Operating and Financial Review (a UK government initiative led by the Department of Trade and Industry to change company law). The fact that companies claim certain basic rights, and that these are almost never acknowledged by CSR researchers and practitioners, is not merely of academic interest. Rather, the ignoring or taking for granted of these rights tells us a great deal about what CSR is and what it can be for development. First, we need to recognize that when we talk about values in relation to capitalist enterprise, there is a difference between the values that are negotiable and those that are not. Non-negotiable values are the fundamental principles mentioned above. CSR has had no impact on these, and it is possible to argue that by overlooking them CSR has further added to their unquestioned legitimacy. Second, we should be aware that because these values go unquestioned, they are often regarded as having primacy over conflicting sets of norms, values and priorities. For example, a communitys rights to land affected by mining can be subject to extensive negotiation as part of CSR stakeholder engagement, but the right of an artificial entity such as a mining company to own and dispose of land is not questioned. Third, in some instances the non-negotiable values will not be shared by, and may conflict with, those of intended beneficiaries of CSR in developing countries. For example, the idea that land, labour and other commodities can be bought, sold and otherwise alienated is a very particular concept that is by no means universal, and workers or communities may have very different expectations of a companys obligations towards them. Fourth, there is a risk that by putting some social and environmental justice issues into an arena for

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Corporate Social Responsibility public debate while ignoring others, we are allowing the interests of company managers and investors to redefine what justice can and cannot mean. The distinction made above between negotiable and non-negotiable values helps clarify why some aspects of businesss relationship with wider society have been included within CSR while others have not. CSR has fostered change in areas that business has been willing to negotiate over. Some of these are relevant to the poor and marginalized, but that is not the major determinant of what is addressed. In some cases, the changes have involved a real financial cost, and there are instances where a commitment to CSR has been responsible in part for significant changes in business relationships. Equally, there are examples of individual companies suffering because they fail to comply with the CSR demands of their customers. But none of the changes that have occurred constitute a challenge to the basic rights asserted by business as a whole. The business case and the development case The business case for CSR is a common theme in articles, conferences and consultants pitches to companies. The conviction that we need to make a commercial argument for why companies should seek to deliver social and environmental benefits in part demonstrates the point made in the previous section about the dominance of the fundamental values of business over competing ones. This raises important questions for development. There are broad issues to do with how far it is possible and desirable to make a business case for developmental goals, and what can be done to ensure that goals for which there is not a business case remain legitimate. But, perhaps more importantly, we need to be constantly alert to how a business-like mindset affects the way we think about development, and the consequences for the poor and marginalized of managing development in a business-like fashion. Perhaps the biggest influence business will have on development is not in the direct impact of individual companies, but in the influence of business thinking and related notions of managerial efficiency on how we view and construct the world. As anthropology and development studies have made apparent, developing countries are home to a rich diversity of social and value systems. It is equally apparent from sociology and business ethics that capitalist enterprise has particular cultural and ideational roots, even though these are often treated as universal. Indeed, when we talk about globalization, what we are referring to is not a dominant economic system, but the fostering, legitimization and universalization of a transcendental form of knowledge, especially in respect to political, economic, ethical and social theory.8 CSR is an example of this process, reflecting as it does four of the key elements of globalization: the spread of rationalism as a dominant knowledge framework; the direction taken by international capitalism; technological innovation in communications and data
8

John MacLean, Towards a political economy of agency in contemporary international relations, in Martin Shaw, ed., Politics and globalisation: knowledge, ethics and agency (London: Routledge, 1999).

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Michael Blowfield processing; and the establishment of new enabling regulatory frameworks.9 We see these elements in contemporary CSR practice:

Its standards are rationalist in that they are rooted within a particular configuration of knowledge that is secular and anthropocentric, employing methods firmly rooted in the science of enquiry and instrumentalist problem-solving. It treats capitalist assumptions and values (e.g. commoditized labour, the rights of capital) as universal norms even when these might run counter to the well-being or experience of workers and local communities. It also reproduces capitalist constructions of social relations that are either unchallenged or at least held up as norms against which other social constructs are tested for true or false value (e.g. private as opposed to communal property, the corporation as a moral entity, the individual rather than the community as the subject of benefit). The technologies used in CSR reflect a preference for measurement, quantitative data-processing and particular means of communication as part of globalization, at once allowing speedy and widespread access to information about poor company performance, and segmenting information into quantifiable components to aid the process of management. CSR is used as a form of regulation, part of an apparent growth in voluntary regulation that has evolved to fill the regulatory deficit in certain aspects of human endeavour beyond the boundaries of the state.

Some feel that CSR, as an evolving field, is inherently difficult to critique, but this is to deny the existence and influence of structural elements such as those that define globalization. If we want to understand the extent to which business influences CSR, it is more useful to look at how the interests of business are favoured as part of globalization than to look for examples of particular companies and industries influencing the CSR agenda. In terms of understanding how business affects development, we need to distinguish between the business case and the case for business. CSR has proved able to influence the behaviour of individual companies and peers within related industries, while at the same time leaving intact the fundamental values of the contemporary capitalist enterprise, values that do not dictate globalization but that are nonetheless reinforced and normalized by it. In so far as the poor and marginalized share values that complement those universalized through globalization, there is a possibility for them to benefit from CSR. But CSRs potential is much weaker (a) where the poor and marginalized hold alternative, non-complementary values; and (b) where the impact of business on society cannot be addressed at the individual company or industry level, but rather relates to the nature of business itself.
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Jan Aart Scholte, Globalization: a critical introduction (New York: Palgrave, 2000).

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Corporate Social Responsibility I have touched on the first of these points earlier. With regard to the second, CSR operates at the company and sometimes the industry level, and thus does not tackle or even acknowledge any structural dimensions to the business poverty relationship. For some critics of international development, this simply reflects a wider malaise, where poverty and disadvantage are thought of as difference rather than the consequences of hegemonic power.10 But if poverty is structural rather than, as much of modern development theory implies, a matter of capacity, access and opportunity, then CSR is unlikely to provide a solution. On the contrary, the strength of CSR lies not in presenting an alternative model of business, but in capturing and presenting the moral dimensions of capitalism in ways that resonate with investors and consumers, and are actionable by managers. It reminds us that there is a moral purpose to capitalism, but does not help answer Charles Handys question about for what and for whom business exists. Implications of CSR for development The above discussion makes important points for anyone working in international development. First, we can see that there is a need to adopt a critical approach to understanding both the practices and the potential of CSR. At present, the critical perspective is synonymous with an anti-CSR stance which essentially argues that the only real purpose of firms is to make a profit and protect shareholder wealth. This is an important view of the company, but one that is neither historically comprehensive nor necessarily reflective of the views of all major business leaders. In talking about a critical perspective, I am not denying the importance of companies managing their relationship with wider society, as this has been a constant throughout history; on the contrary, I am arguing that we need a more comprehensive and nuanced view of that relationship than the one offered by CSR. Second, that more nuanced view allows us to see that CSR accepts certain business values as non-negotiable, and addresses only what business is prepared to accept as negotiable. Therefore, the definitions of social and environmental justice acknowledged in CSR are different from those we might expect to be used in international development. Consequently, even when CSR makes a positive contribution to development goals, there will still be gaps that need to be tackled by government and civil society. More thought needs to be given in policy-making circles to what is the best balance between voluntary and mandatory approaches to regulation. Moreover, although some of the resulting policies and initiatives, from voluntary and mandatory regulation, may complement business activity, we need to accept from the outset that in some situations achieving social and environmental justice still requires international development to challenge and oppose businesss interests.
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Ankie M. Hoogvelt, Globalization and the postcolonial world: the new political economy of development (Baltimore: Johns Hopkins University Press, 2001).

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Michael Blowfield Third, it is clear that the business case has had a significant effect on what is and is not considered a corporate responsibility within CSR. Both business management mindsets and business investors prerogatives have significantly influenced the interpretation and practice of CSR. While this has led to some important changes in business thinking, we need to be vigilant to ensure that CSR does not come to define the extent of corporate responsibility to the exclusion of other legitimate demands, such as paying taxes. Indeed, it is informative that one of The Economists criticisms of CSR is that it does not contribute to the kind of rigorous public policy needed to increase businesss contribution to the public good.11 Fourth, business self-interest can also take precedence over wider societal interests if we treat the outcome of partnerships with business as unbiased, and thus overlook the consequences of the norms of business influencing our thinking. This in turn can result in accepting downgraded expectations of what the actions of business should contribute to society, as has already been apparent in recent years in the ways arguments for business efficiency have reshaped expectations of health care and pensions. None of this is to dismiss CSR as folly. It has led to new notions of responsibility in supply chains that go deep into some developing countries, and it has forced business to take an unambiguous position about certain aspects of environmental management and abuses of human rights. Not least, it has revealed that the dominant model of globalization has a moral dimension that is being treated as universal just as its economic and political dimensions are. Moreover, CSR helps us to see some of the constraints and limitations on reforming this dominant model of globalization, and thus uncovers areas where we need to revisit our development thinking. Indeed, perhaps CSRs biggest contribution has been to stimulate new thinking about the businesssociety relationship, and even if we are a long way from finding solutions, we are at least becoming aware of the need for new forms of dialogue.

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The good company, The Economist, 20 Jan. 2005, accessed at www.Economist.com, 13 Feb. 2005.

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