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Commentary: When CSR is
neither profit nor public
good

Moving in and out of hotels, Jay Westerveld noticed the prevalence of promotional "green cards" placed in guest rooms to promote water conservation and other environmental practices such as reusing towels.

Oddly, the New York-based environmentalist found a disconnect between the hotel's promotion and its backroom practices.

Thus the term "greenwashing", an amalgam of "green" and "brainwashing" -- defined as "expressions of environmentalist concerns especially as cover for products, policies or activities" -- was born.

That was more than two decades ago.

Like born-again Christians, today's corporations have found a conscience: A rite born out of the "triple bottom lines" and "ethical supply chain management" from the gospel of Corporate Social Responsibility (CSR).

Guided by such a conscience, savvy consultants seek commercial currency by preaching the new business gospel through classy presentations and a cant pitch of corporate philanthropy.

Appropriating the language of environmentalists, CSR has become a confession chamber absolving all manner of sins as shareholders are consecrated through socially responsible investment.

No wonder former U.S. labor secretary Robert Reich in his book Supercapitalism took a rather cynical view of CSR as a simple ruse of enlightened self-interest.

Why should companies be given credit for something they should already be doing anyway, Reich asks, hearkening back the words of economist Milton Friedman, who opined that "The social responsibility of business is to increase profits."

Many, of course, like Harvard Business School professor Michael Porter and Economist magazine have rebuked Reich's critique of CSR as an obsolete mindset in modern business.

But if a major extraction company opens new economic activity centers in the vicinity of its drilling site before starting operations in our easternmost province, is that CSR, or a distraction to offset the negative impact of their core operations?

Risk and reputation management have been primary motivators in CSR engagement.

In a digital age where consumer awareness is reinforced, companies are selling their reputation just as much as their product.

Engagement in CSR provides justification for a company to sustain operations that it presents as beneficial to the skeptical community. It engenders a sales pitch to build brand loyalty by appealing to consumer conscience.

Companies delve into CSR in several ways.

These can range from the simple reputation-enhancing mode of corporate donations to the subliminal promotion techniques of cause-related marketing and the complex issues of community engagement.

But CSR should mean going beyond what the law requires, accepting that funding for these "projects" be guided by profit sharing, not cost sharing.

In other words, allocation for CSR should come from nontax-deductible profits, hence preventing a decline of state revenue. It seems contradictory that companies should seek deductions for an activity (CSR) which eventually amounts to them increasing profits.

One fundamental aspect of true CSR is that ethical behavior starts at home by executing equitable standards of corporate behavior.

Such applicable codes of conduct toward the treatment of company employees is arguably the first gauge of whether a corporation is already thinking ethically and responsibly.

For a country like Indonesia, corporate engagement in CSR helps overcome the infrastructure development and institutional capacity in many remote areas.

As the UN Innovation Brief published last year said, "CSR can help to develop capacity within public policy ... to free up existing resources."

But herein also lies the gravest danger CSR programs pose in the long term: The involvement of corporations potentially supplant the role of local administrations and usurp power away from the state.

Corporations, through their "CSR" activities, become powerful entities at the local level as dependence on corporate "contributions" grow to fill the void left by ineffectual administrations.

This is why Reich described CSR as a dangerous diversion that is undermining democracy.

In her study of CSR in Indonesia for the UN Research Institute for Social Development, Melody Kemp wrote that it is premature to speak of CSR when the tools of civil society are structurally and legislatively weak.

"The inherent conflicts between CSR and, in particular, political culture, may ensure that in Indonesia implementation of CSR is merely cosmetic".

It is necessary for the government to continue oversight by issuing regulations on articles concerning social responsibility in the Investment Law and the Limited Liabilities Company Law.

Philanthropy is not mandatory, but social responsibility is.

If the public does not ensure CSR becomes more substantive than what it is, and companies change it from what it wants, then we will end up with nothing more than those promotional "greenwash" hotel cards.

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