Prof. Bodo B. Schlegelmilch: CSR and social expectations

Aug. 2020

Prof. Dr. mult. Bodo B. Schlegelmilch from the Vienna University of Economics and Business has been conducting research in corporate social responsibility (CSR) since the 1990s. In his most recent book, he discusses CSR from a variety of angles. We talked to Prof. Schlegelmilch in his Vienna office and discovered that even the Covid-19 crisis is having a positive impact on CSR.

Hello Professor Schlegelmilch. Everyone seems to be talking about CSR at the moment. Can we start by asking if there’s a clear understanding of what CSR actually means?

Yes, the definition of CSR is somewhat vague. In some ways it has overlaps with business ethics, but on the other hand it has something to do with sustainability. All three terms seem to flow into one another. But actually, CSR describes a company’s obligation to do something for society – above and beyond legal requirements. That said, this definition is also a stumbling block. To what extent is it an obligation? And to what extent is it voluntary? Is it ‘only’ about addressing negative influences with a bearing on the activities of a company (such as making production as environmentally friendly as possible), or do businesses actually have a moral obligation to do something for society, over and above their statutory obligations (such as helping the homeless or building children’s homes)?

There are a number of different opinions on this in the literature. The author Edward Freeman is at one end of the scale. He argues that companies are instruments of public policy and have a moral duty to take care of socially disadvantaged groups. This contrasts to Milton Freedman, who argues that for companies, social responsibility is first and foremost about raising profits according to the rules of free competition, without deception or deceit.

You’ve been researching CSR since the 1990s. Have perceptions shifted since then?

CSR – or business ethics, even if no-one called it that – has always been around, everywhere. For example, there were industrialists who took particular care of the local community. In Japan, big companies were writing corporate codes of ethics long before American or European companies. But now the topic has really come to the fore. There are very few interviews with prominent CEOs in which they don’t highlight all the projects their companies are involved in in the area of CSR. There’s also increasing interest in the topic at business schools. Naturally, students are still interested in different ways to improve profits, but they’re also interested in understanding the role companies should be playing in society.

So profit is not just ‘one’ key measurement?

Correct, because it’s comparatively easy to measure how well profits are doing if you want to judge a company. On the other hand, if a company wants to be profitable but at the same time wants to behave in such a way that it doesn’t do harm to the environment – or its employees and business partners should be treated well, and it should also be doing something good for society – that makes it more difficult to gauge company results. Can weaker profits be explained away by CSR campaigns? Or do CSR campaigns actually result in rising profits? To what extent are senior management entitled to make CSR expenditures? Isn’t that a decision that should be taken by the owners, i.e. the shareholders – that they should decide what should be done with any returns that are generated? There are so many questions that need to be posed, and some of them are pretty debatable.

So what about CSR reporting?

There are now some fairly good reporting standards, such as the Global Reporting Initiative (GRI). But despite this, the main problem is still measurability. How do you measure humanity? How do you measure contributions to environmental protection? You can still measure carbon emissions, but it soon gets complicated working out sensible measurement criteria in this area. And also, it’s difficult to check things objectively. So you always have to be careful, because there are so many ways to manipulate the numbers. Just think about so-called greenwashing.

What should companies think about when engaging in CSR communication?

Communication must be credible and realistic, so you shouldn’t pander to people’s expectations or get pushy, otherwise it’s easy to put consumers off. It’s awful when companies first come out with those big slogans and then later, ethical misdeeds come to light. So if you’re going to use CSR in your positioning, it has to be thought through properly.

Is CSR one of those trends at the moment, something lots of companies are getting into?

I think CSR is getting more and more important, and you can see that it’s developing into a social expectation. It’s a bit like shopping bags. In the old days, plastic bags were everywhere, but now it’s almost like they make you a social outcast if you use them, so you start using cloth bags instead. ‘Good’ conduct in the corporate setting results in others following suit if a certain number of organisations start becoming CSR-aware. Expectations are tremendously powerful!

What’s more important in motivating companies: doing something good or simply avoiding becoming a social outcast?

You can’t really generalise on that one; it depends on the company. I think quite a lot of them take CSR extremely seriously and also want to bring about social or environmental change, or at least support it. But then there are others who just jump on the bandwagon so they don’t look bad.

Lots of companies make donations and think they’ve done their bit. How does that come across to members of the public?

In the worst-case scenario, consumers don’t even notice . You’re more likely to raise awareness if there’s a logical link between your CSR activities and the business activities of the company, and I think that’s also more authentic. If a computer company provides schools with computer equipment and this also has a connection with education, it’s a good match. Or if a pharmaceutical company becomes involved in healthcare services, that also makes sense. But if they sponsor an exhibition of indigenous art in the Amazon, people start asking why they’re doing it. Wherever possible, CSR should be a good match with the core business and be part and parcel of overall business processes. It rarely works running CSR separately, with a department thinking up projects by itself.

So what do companies need to think about if they’re looking for a suitable partner to work with them on CSR?

There are lots of organisations and NGOs that have developed expertise in this area, and by doing so they’ve earned a good amount of legitimacy. They have to pursue a good cause, they have to be perceived as doing so by the general public, and they have to work professionally and document what the money is used for. It’s particularly important to show the impact, so a company should give specific feedback on what it achieves by helping others. Companies also have to justify spending money on CSR – which brings us back to measurability again.

What direction do you think the topic of CSR will go in?

It will become even more important than it is now. The current Covid-19 situation has actually accelerated the existing trend. For example, what happened with mask production really exposed the fragility of our supply chains. People have already started wondering if continually improving things purely for economic reasons is really the right way forward – and this is something I’m increasingly seeing reflected in other areas. Think for example about flying to meetings, which was quite normal only months ago and suddenly it had to be replaced by video-conferencing. I firmly believe that video-conferencing and working from home will continue after Covid-19, at least in some areas. The pandemic has shown us that more environmentally friendly work is possible. Covid-19 has made us re-evaluate our behaviour and goals in lots of areas. And that includes the role played by companies in society and thus also the role of CSR. Maybe the crisis will also result in us being more humane to one another.

Prof. Dr. mult. Bodo B. Schlegelmilch

 

Prof. Dr. mult. Bodo B. Schlegelmilch is head of the Institute for International Marketing Management at the Vienna University of Economics and Business, chairman of the Association of MBAs (AMBA) and is actively involved in lecturing at a variety of institutions worldwide. His recent book, Rethinking Business Responsibility in a Global Context: Challenges to Corporate Social Responsibility, Sustainability and Ethics, published with Ilona Szőcs in February 2020 (Springer Publishing), examines CSR from a variety of angles.