How ‘good’ does a shampoo need to be? (Financial Times, By Gillian Tett)

In today’s world CSR programmes have become a useful salve for a troubled corporate conscience

Until recently, I thought that Unilever was a company whose primary purpose was to make products such as shampoo. No longer. Last week, I chaired a panel of business leaders on the sidelines of theWorld Economic Forum in Davos. And during that debate, entitled “The Future of Business”, it became clear that most business leaders do not really want to talk about the grubby financial realities of business these days, or, at least, not at Davos.

Instead, Keith Weed, the charming head of marketing at Unilever, earnestly outlined the social and environmental initiatives that Unilever is now pursuing to help the 2 billion consumers who apparently buy its products each day. Whereas the company used to think of corporate social responsibility (CSR) programmes as separate from core business, he said, these days CSR is at the core of everything it does.
Similarly, Novartis, the pharmaceutical giant, is now devoting considerable energy to bringing health initiatives to poor people around the world, even at a loss. Daniel Vasella, its chairman, told the panel that this makes him “very proud” (never mind the commercial side of Novartis’s work). Meanwhile, T.K. Kurien, the head of Wipro, the Indian technology group, explained that his company is also expanding its social programmes in response to employee demand. “Young people in India used to be happy to have a job. But now they are aware [of social issues] – they don’t want to work in something such as defence, but [in] something like health.” And these companies are not alone: a senior employee at Bloomberg revealed that CSR pages are now one of the fastest-growing sections of its data terminals. That is apparently because investors are clamouring for information about companies’ CSR programmes, be that in relation to “responsible” shampoo – or anything else.

Is this a good thing? Some observers think it is. Nadine Hack, executive-in-residence at IMD business school in Lausanne, for example, firmly believes that companies should be applauded for being more socially engaged. After all, she argues, companies are so powerful these days that there is little hope of addressing societal problems – environmental, economic or anything else – without their support. Conversely, when corporate muscle is engaged, the outcomes can be powerful: when, for example, Coca-Cola started battling Aids in Africa, it had an extraordinary impact.

But there is a powerful counter-argument, too: some business leaders retort that companies would actually do better to focus on their primary function – namely the business of making money – and leave governments to worry about those bigger social goals. After all, governments are elected to make countries better, so why do unelected company executives feel any duty to reach into other areas of life? “The fact that companies are doing all this CSR stuff just shows that government has failed,” muttered one British manufacturing executive.
My views lie somewhere between these extremes: I think that companies should recognise their wider impact on society, but I also think that it is primarily up to governments – not companies – to set the rules and pursue wider social aims. In other words, I don’t want Unilever to trash the environment with high-margin shampoo, but I expect the government, not Unilever, to set environmental standards, penalise miscreants – and tax Unilever to help the poor.

But whatever I (or anybody else) thinks of the merits of CSR, my experience of Davos suggests its strategic importance can only grow right now. That is partly because governments are blatantly failing to pursue many of their core responsibilities, forcing companies to step in.

But a second, related, factor is that company executives themselves are getting scared of wider social strains. Just before this year’s Davos meeting, for example, a survey from the World Economic Forum showed that “income disparity” heads the list of issues that Davos Man thinks will threaten global stability this year. That is stunning, since income disparity never even featured on that list until this year (it was previously dominated by concerns such as the “asset price collapse”, “oil shock” or “fiscal crisis”).

Corporate executives do not have any easy answers to this. As Wipro’s Kurien observed, with commendable honesty: “We [in business] can all see the problem of income disparity, we just don’t know what to do about it.” But, in today’s world, nobody wants to sit on their hands; somehow, they need to be seen to be doing something. Hence the appeal of CSR, in Davos and beyond; in today’s world, it has become a useful salve for a troubled corporate conscience, if not a quasi amulet that companies like to wear as a protection against the evil eye (or, at least, future social strife).

And somewhere along the way, CSR is delivering some genuine good for people who need help – at least, I fervently hope so. Either way, it provides something else to ponder on the next time you buy a bottle of commercial shampoo.