Blog Editor’s note: The authors’ paper, “Strategic Corporate Social Responsibility and Environmental Sustainability” is open access until September 10th 2021 as part of the journal’s 60th anniversary celebrations.
Decisions about corporate social responsibility (CSR) and environmental sustainability are not easy because organizations must anticipate stakeholders’ future blame for inaction (Fu, Boehe, Orlitzky, & Swanson, 2019). Unfortunately, this future orientation of CSR means it is often detached from hard evidence that would test CSR for its capacity to accomplish broader strategic organizational goals. In implementing environmental and social initiatives, many managers seem to follow the crowd or the latest fashionable ideology. However, what is at present best institutional practice may not be best for the specific individual company, given its unique circumstances.
The best way to avoid the pitfalls of CSR groupthink is an unapologetically rational, firm-centric approach to decision making about CSR and sustainability. In our article introducing the BAS Special Research Forum on “Strategic Corporate Social Responsibility and Environmental Sustainability,” Don Siegel, David Waldman, and I (2011) outlined how executives could learn to think like economists with respect to CSR and sustainability. Specifically, we highlighted (1) cost-benefit analysis, (2) transaction cost economics, and (3) the resource-based view of the firm (RBV) as analytic approaches that can prevent any harmful impact of CSR on a company’ financial bottom line.
Such a rational approach to CSR and sustainability involves, first, a forward-looking analysis of all benefits (e.g., new strategic opportunities) and costs (including opportunity costs) of a specific CSR project or initiative (see also McWilliams & Siegel, 2001; Porter & Kramer, 2006). Second, organizations may minimize transaction costs and create shared value, e.g., McDonald’s collaborated with the Environmental Defense Fund in a long string of joint projects over more than three decades (King, 2007; Porter & Kramer, 2011). Third, with a RBV mindset, business executives rationally assess potential synergies between their research and development capabilities and CSR projects such as eco-innovations, which can be powerful cost-saving technologies (Fu, Boehe, & Orlitzky, 2020; Przychodzen & Przychodzen, 2015).
Nevertheless, our 2011 BAS article also highlighted how a long-term managerial orientation, based on a broad definition of business success, may prove to be superior to short-term instrumental considerations (see also Orlitzky & Benjamin, 2001; Orlitzky, Schmidt, & Rynes, 2003; Orlitzky & Swanson, 2008). CSR is most likely to pay off economically if organizational leaders are visionaries. One such visionary was Ray Anderson (1998), who motivated employees with a long-term sustainability mission (“Mission Zero”) to eliminate waste and harmful emissions at his carpet-manufacturing company, Interface, Inc.
An important aspect of this rational approach is to identify (and focus on only) those social and environmental issues that are nonpartisan. Inherently divisive, political issues should be sidestepped because engaging in culture-war disputes is not prudent risk management. However, for executives and CSR/sustainability directors that live in ideological echo chambers, this is easier said than done. They often accept the “consensus” view, typically taught at ideologically biased colleges (Bonica, 2014; Duarte et al., 2015; Jussim, 2012), as best practice for their individual companies. Especially with respect to sustainability, it is important to pay attention to the empirical evidence rather than the social activists that predictably call for change for change’s sake (see also Orlitzky, 2013).
Applying company-specific instrumental reason ought to show an in-depth understanding of current customer preferences (McWilliams & Siegel, 2001). Many customers are turned off by, and turn off, preachy business virtue signaling about social and political issues (see also Orlitzky, 2018). So, when customers prefer an apolitical posture, taking a stand on partisan issues is only going to be a counterproductive distraction. For example, Dana White, President of the UFC, endorses corporate apathy about political and social issues because he understands his customer. In contrast, the customers of Jessica Alba’s Honest Company have very different preferences than those of the UFC in terms of the company’s social mission.
Rational decision making on CSR and sustainability is evidence-based and opposes a moralistic or utopian stance rooted in institutional groupthink. Yet, a lot of the staff tasked with implementing CSR (and, to lesser extent, sustainability) have been influenced by radical social constructivism in their education and training. This linguistic, “problematizing” turn in social science rejects not only reason (Nola, 2003), but even the possibility of objective truth (Peterson, 2018; Saad, 2020). Influenced by the enemies of reason (see also Nola, 2003), companies may, perhaps inadvertently, become the subversive grave diggers of an economic system responsible for individual freedom, prosperity, and innovation (Hayek, 2001, 2011; Schumpeter, 1947).
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