Olivier Delbard, Professor at ESCP Business School, explores how the global health crisis is re-shaping Corporate Social Responsibility
The current global health crisis raises more than ever the question of responsibility: the responsibility of governments and public actors in the first place but also the responsibility of the economic fabric and companies. Beyond the economic and legal stakes, civil society’s expectations are increasingly pushing companies to engage in voluntary social responsibility policies based on ethical commitments to society and the environment.
What is Corporate Social Responsibility?
Corporate Social Responsibility (CSR) is a concept that originated in the United States in the 1950s and, after arriving in Europe in the 1990s, has eventually conquered the whole world over the last 20 years. However, the concept of CSR lacks legibility because it can take many different forms. In Europe, for example, it is increasingly seen as a strategic vision of sustainability, whereas in other parts of the world, it remains more closely associated with traditional philanthropy, based on the principle of “giving back” – i.e. the redistribution of part of the wealth accumulated in favour of those who need it most.
However, the current pandemic has highlighted the need for effective and sustainable corporate social responsibility more than ever. Philanthropy, which is essentially ad hoc and short-sighted, does not provide a satisfactory response to large-scale social and environmental issues. Our analysis of corporate behaviour at the beginning of the health crisis, particularly during the containment period, has highlighted the range of responses from corporate organisations, both long-term and short-term.
For a large number of companies, traditional CSR (“CSR-as-usual”) was the classic response, of a philanthropic nature, and took the form of providing protective equipment or setting up emergency funds.
Stakeholder theory
Other companies put the stakeholder theory into practice, drawing on the simple but powerful idea put forward by Freeman, the founding father of the theory, that “stakeholders have names, faces and children”. This has led to companies changing their production lines to help the government, extending the scope of social protection for employees, and providing free services to their customers or maintaining payment commitments to their suppliers.
For companies that have moved beyond the philanthropic and compliance approaches of CSR to adopt a long-term strategic vision, this crisis has been a test of their willingness to integrate sustainable development issues into strategy and operations over the medium and long term, addressing questions such as, how can we resist the classic reflexes of focusing solely on short-term economic and financial issues, to the detriment of longer-term societal and environmental issues? With this last type of response, the question of systemic model change arises more than ever; it is indeed the continuation of a holistic and long-term vision that will enable companies to reinvent themselves and adapt to a constantly changing world.
Managers are therefore faced with some fundamental questions related to the many challenges facing companies: in terms of governance and organisation, how can we move from a shareholder governance model to a partnership governance model that includes key stakeholders? Concerning employees, how can jobs be safeguarded throughout the crisis?
Supply chain issues, as the crisis has shown in an acute way, are also key: how to move from a dispersed global chain to a more local and sustainable supply? Finally, of course, there is the central question of the product or service offered: how to make one’s commercial offer more sustainable and responsible while maintaining a satisfactory level of profitability? So, these are some of the fundamental questions that must be asked by companies who now want to stay the course of sustainability while weathering the storm in the short term.
An expected paradigm shift?
Some of the changes that were perceptible before the health crisis had already highlighted the importance of the company’s paradigm shift, such as the creation of the international B-Corp label, new forms of enterprise combining profit and social purpose. Faced with social and environmental emergencies and driven by the aspirations of the young generation of graduates, the business world is being led to rethink its mission. But this requires a complete overhaul of the way of thinking within the company and, given the scale of the current crisis, the temptation to fall back on old methods and recipes is strong.
The next few months will be crucial: how many companies will have the capacity to maintain the course of sustainability while managing to overcome the many obstacles linked to the crisis? Here too, the human factor has the last word: everything will depend on the ability of managers to be visionary and maintain a long-term vision, which manages to reconcile the social issues directly linked to the crisis with the more diffuse but vital environmental issues, particularly climate change.
Beyond Europe, which is pushing companies to develop a strategic approach to sustainability issues, the COVID-19 pandemic is pushing us to rethink CSR, particularly in developing countries. Here again, perhaps counter-intuitively, the time has come for companies in these countries to go beyond traditional philanthropy and take their responsibilities as actors of change for society and the environment, which have been so badly damaged.
This piece is based on the impact paper I wrote as part of the ESCP Business School’s “Managing a Post-Covid19 Era” series, which examines the role CSR may play in helping businesses respond to the Covid-19 crisis in a sustainable and responsible manner.
