Back to the future: Harvard ditches the business case

A recent article in Harvard Business Review argues that CSR should not be expected to deliver business benefits. Far from being a fresh insight, this argument risks undermining twenty years of hard-won progress, writes Richard Hardyment. 

Harvard Business Review (HBR) has started the year with a controversial claim: that it is “asking too much” of corporate social responsibility (CSR) to “deliver business results”. The authors of The Truth about CSR assert that there is too much pressure to “dress up CSR as a business discipline”. Instead, they advocate the softer approach of aligning company activities with “purpose and values”. In other words: forget the business case, let’s get back to doing some “good” through bolt-on activities and warm words. With this worrying stance, HBR seems to be marking the start of 2015 by attempting to turn the clock back to the 1980s.

This is dangerous talk. Many companies, global bodies, academics and even non-profits have spent decades advancing the case that responsible and sustainable business practices are in the long-term interests of companies and their shareholders. This commercial case is not easy to measure. But it’s crucial to recognise. Without it, corporate responsibility remains stuck as a side-show.

It is particularly maddening for this nonsense to come from HBR. Over the years, the publication has brought us Michael Porter and Mark Kramer’s world-famous Creating Shared Value; Stuart Hart’s landmark “Beyond Greening: Strategies for a Sustainable World” (1997); and much more besides.

Yet this month’s “Big Idea” suggests that “business results” from CSR initiatives “should be a spillover, not their reason for being”. Kasturi Rangan, Lisa Chase and Sohel Karim spell out how philanthropic activities (the “first theatre” of CSR activities) are “not designed to produce profits or directly improve business performance”.

This argument fundamentally goes against proven methods of embedding responsible business practices into a company. It naively disregards both the nature and purpose of profit-seeking enterprise. If there are no long-term business benefits from behaving responsibly or getting involved in the community, then why should any shareholder be convinced? Why would any business manager sustain the activities when budgets come under pressure? A moral case can, of course, convince some. But we need to be realistic about how far that can take a company today.

For some companies around the world, an absence of any long-term business angle to their community programmes may be the current reality. However, it’s certainly not the direction of travel, nor does it match best practice advice. For example, the Dow Jones Sustainability Index, the world’s leading standard for investors on these issues, encourages companies to measure the commercial benefits from their philanthropic and other CSR activities. The Dow Jones approach draws on our own LBG methodology, which was developed over 20 years ago to measure both social and business benefits from community investments. Too few companies back in 1994 were thinking about impacts, something which has taken years to change (now over 300 companies worldwide use the framework).

HBR also falls flat with its choice of case study. The article highlights an American midwestern bank that totted up its cash donations to re-focus them on local schools. This is apparently “about collecting activities that are consistent with the company’s business purpose and have a valuable social goal that the company cares about”.

There is no mention of employee involvement. No in-kind community contributions. Because the authors think that business benefits don’t matter, there is no analysis of improved staff engagement, motivation, retention or pride. There is no thought given to stakeholder relationships, such as improved links with the local community. And, of course, there is nothing about how the bank’s reputation might have improved one iota. In fact, the authors reach the astonishing conclusion that “measuring top or bottom-line impacts would be irrelevant” in this case. In other words: carry on throwing cash at the community and let’s not worry about why, or how much.

To be fair, the rest of the article explores two further “theatres” where business benefits play a role: “operational efficiencies” and “transforming the business model”. Yet this three-part model feels a little overdone; the very same authors outlined it nearly three years ago. The other main idea of the article – that companies should better coordinate their disparate CSR activities – is reasonable, but hardly profound.

Come on Harvard: this isn’t a “Big Idea”! Where are the fresh insights coming out of one of the world’s leading business schools? You should be championing the measurement of business benefits for all programmes as one of the major trends for CSR this decade.

Back in 1994, HBR published a truly ground-breaking article. “The New Corporate Philanthropy” called for a “new paradigm” of corporates tackling social issues to unlock “a powerful competitive edge”. N. Craig Smith outlined how some leading firms in the United States were bringing together their donations with employee volunteering and pro bono advice. By thinking strategically, these pioneers were able to join-up different business functions, motivate and retain staff, form strategic alliances and better survive the early 1990s downturn. Philanthropy was no longer just about values and giving money away, but about creating an impact: for the community and the company.

Two decades later, it’s sad that HBR seems to be turning back the clock. Let’s just hope that the next generation of Harvard graduates dig a little further back in history for their guidance on corporate responsibility.

Richard Hardyment is an Associate Director at Corporate Citizenship.