The Paradox of Corporate Social Responsibility Standards

Our definition of CSR Standards is very similar to the definition of International Accountability Standards (IAS) recently adopted by Gilbert et al. (2011) in a Business Ethics Quarterly Special Issue dedicated to IAS. According to the authors, IAS are “intended to encourage and guide corporate responsibility, and to provide multinational corporations (MNCs) with ways to systematically assess, measure and communicate their social and environmental performance.” (Gilbert et al. 2011, p. 23).

Two of the authors have been for more than a decade (and still are) personally involved in international CSR standard setting initiatives—such as The Q-RES Project (de Colle et al., 2003), AA1000 (AccountAbility 1999), The Global Reporting Guidelines and ISO 26000), and have personally advised organizations in the adoption and/or the assessment of CSR standards. Therefore, our belief that CSR standards can be beneficial is not based on theoretical speculation alone, but also on practical experience in the field. Nevertheless, we focus in this work on those critical aspects that we feel need to be addressed by standard developers and users.

See, for example, Leipziger (2003), Rasche and Esser (2006), Gilbert and Rasche (2007, 2008), de Colle (2006), Waddock (2008) and Gilbert et al. (2011).

For example, while AA1000 does include a set of “accountability principles” that constitute its substantive part, but the core of the standard is in its process for the activity of social and ethical accounting, auditing and reporting, and for stakeholder engagement.

We are grateful to Mike Peirce, former Chief Operating Officer of AccountAbility, who helped us developing some of these ideas.

We would like to thank an anonymous reviewer for suggesting these last two points.

Interestingly, the 2004 amendments of the Guidelines include a significant attempt to reduce these limitations by emphasizing the need for companies to “[take] steps to build cultures that encouraged employee commitment to compliance” (Hess et al. 2006). This shift towards integrity-based approaches can be seen as an attempt to limit the negative effects of an excessive focus on compliance, moving from a merely preventive approach (compliance with the law) to a more proactive approach focused on developing ethical cultures within organizations (Hess 2007).

The expression has been also quoted by The Economist, “The dangers of corporate social responsibility”, November 21, 2002.

This example also shows how poorly designed performance assessment systems can exacerbate this problem, by introducing perverse incentives that lead managers to seek higher scores in whatever indicators their performance is measured against, no matter how meaningful they are to the overall performance of the organization.

As de Colle and Werhane notes, “it is the combination of moral imagination with moral reasoning that enables creative moral decision making” (de Colle and Werhane 2008, p. 760).

Sacconi (2007) suggested a similar approach, arguing that a proper standard design would ask for the following: (a) abstract and general principles–mutually acceptable by corporate stakeholders and capable to provide some pattern recognition for unforeseen events; (b) a few prophylactic rules of behavior that must be activated once a state of affairs seems to belong to the domain of application of a given principle; and (c) a dialog procedure (internal to the governance structure in order to ascertain whether any new situation satisfies or not the required degree of membership into the domain of application of a relevant principle.

For example, Freeman and Evan (1990) and Freeman (1994) suggested a model of corporate governance based on “fair contracts” between the corporation and each stakeholder group; Marens and Wicks (1999) discussed how the view that managers bear fiduciary duties toward corporate stakeholders—not just shareholders—is coherent with existing legislation in the US, Phillips (2003) identified an obligation of fairness that arises in any organization toward all the specific stakeholders that, interacting for their mutual benefit, contribute to the achievement of the organization’s mission; and Freeman et al. (2010) have discussed how Corporate Social Responsibility can only be meaningful if it is fully integrated in the way strategic decisions are made, i.e., part of the value-creation process (Integrated CSR) and not a add-on set of activities designed to increase the business legitimacy (Residual CSR).