Microsoft has been rated the most environmentally friendly company by the noprofit Just Capital (2019). It reached carbon neutrality, reduced its products packaging by 20% and donated billions in software services to communities and NGOs in 2018. For example, the company uses its AI to address global warming in India, a country heavily affected by rising sea levels and changing temperatures, providing software tools to help produce higher crop harvest (Microsoft’s commitment, n.d.). But why should the company spend so much money to focus on Indian farmers instead of generating returns to its shareholders? Does Micrsosoft really know what its stakeholders want?
The clash of ideas regarding CSR can be summarized in two words that relate to each other: shareholders vs. stakeholders. The latter category, of course, includes shareholders, as well as employees, communities, clients and environmentalists. Given this context of polarization, managers and students must rule out accusations that discredit the opponent, such as “leftists” or “vegans” aimed at the supporters of CSR, or “troglodytes”, against traditionalists. In the end, there is no shortage of arguments by respected analysts to defend one position or another. One of these analysts is the magazine The Economist. In the editorial “Big business, shareholders and society – What companies are for” from August 22nd 2019, the journal aligns with the supporters of the traditional view of companies, urging: “However well-meaning, this new form of collective capitalism [companies that emphasize CSR policies] will end up doing more harm than good. (...) It is a threat to long-term prosperity, which is the basic condition for capitalism to succeed.”
The text points out two flaws in the history of collective capitalism: one regarding dynamism and the other one related to a clear definition of responsibilities (accountability). The editorial (2019) supports the idea that collective capitalism “leans away from changes” that, in a dynamic system, need to happen. It is always necessary, for instance, reallocating capitals and workers from obsolete industries to newer and more efficient ones. Regarding the weaknesses of accountability, it is not clear how “society” will express what it wants from those companies. Ordinary people are very likely to remain without a voice. In summary, the text defends broadening the number of share owners. In most cases, they will favor maximizing value in the long term, and these should make companies be more accountable. For the magazine, that is the kind of capitalism that is really explained.
Billionaire investor Paul Tudor Jones would probably disagree with some aspects (not with all!) of this editorial. In 2013, he was one of the founders of a non-profit organization called Just Capital, whose goal is measuring what Americans want from corporations and which companies are contributing to build a “fairer” society. The article “A major nonprofit ranked U.S. companies for doing the best for their communities, workers, and the environment” (Feloni, Richard. Business Insider, November 15th, 2019) informs that Just Capital publishes a yearly ranking of the 1,000 largest American corporations based on how they create value in the long term through good relationships with employees, clients and society as a whole. From the perspective of organization, a “fair” company is the one that does the right thing regarding those three interested parties. In the 2020 ranking, high-tech companies confirmed their hegemony, taking eight out of the first ten positions. Microsoft, the “fairest” company in 2019, kept the first place. PayPal, company for digital payments, went from the 45th to the 8th position, whereas Anthem, a health insurance provider and one of the “non high-tech” companies in the “top 10”, with Procter & Gamble, dedicated to sales to end consumers, went from the 52nd to the 7th position (Just Capital, 2019).
2020 Overall Rankings, Just Capital, 2019
The text presents the initiatives of the “top ten” companies regarding topics like community, employees, environment, shareholders (in the case of Anthem) and clients (in the case of PayPal). The latter has an excellent customer privacy policy, whereas Anthem mentions four women among the nine members of the Administration Council. Thus, the initiatives of Microsoft, two-time champion among the “fairest” companies, indicate some of the new directions for CSR companies:
- Communities: last year, Microsoft donated US$1,4 billion in software and services to non-profit organizations.
- Employees: besides guaranteeing 20-week maternity leave and 12-week paternity leave, the company demands since last year that all its providers guarantee 12-week paid leave to all employees.
- Environment: in 2012, Microsoft achieved carbon-neutrality, and last year it reduced by 20% the packaging of its products (Devices Sustainability, 2019).
Apparently, the support to CSR companies very slightly affected the high-tech giant’s net income. See the graph below.
Microsoft’s Net Income - 2002 to 2019 (In U.S.D. billions)
In relation to the differentiation of products, some consumers prefer greener options: for example, a hybrid car over a standard model that may be cheaper, but more pollutant. Is it possible to calculate how many consumers emphasize “environmental sensitivity” and how many of them look for the lowest price? The promotion of CSR initiatives by multinationals divide the public: some people accept it as part of what the company effectively is, whereas others perceive this promotion as mere advertising. This is related to a fundamental issue: a company that invests in CSR initiatives conquers a sustainable competitive advantage in comparison to competitors; or is this advantage only provisional, because competitor will then follow the steps – and, in any case, many people will see these efforts as mere advertising? These are topics that managers must consider when drawing the company’s investment strategy.
Consideration should be also given to the eventual mismatch between a company’s main activity and its CSR initiatives. For instance, the oil company Royal Dutch Shell is recognized for developing relevant CSR activities. To what extent are these initiatives just a smoke screen to make the public forget they basically work with oil and byproducts, all highly pollutant?
Many of those remarks, generally referring to developed countries, Wayne Visser extends to the rest of the world. In a 2009 article Visser, W. Corporate Social Responsibility in Developing Countries. The Oxford Handbook of Corporate Social Responsibility, Jan. 2009, the author explains that he uses the expression “CSR in developing countries” to represent “the formal and informal ways how companies contribute for the perfecting of environmental, work, ethical, social and government conditions of the developing countries where they act, while being sensitive to their predominant religious, historical and cultural contexts.” Visser claims that developing countries present a distinctive ensemble of challenges in the CSR agenda that are, collectively, very different from those faced by developed countries.
To recognize these challenges, he looks into CSR in Asia, Africa and Latin America, and also into the aspects that boost it in those large regions, such as cultural traditions, political changes and socio-economic priorities. Under this prism, managers and students need to combine Visser’s analysis with well-known aspects of the socio-economic and political reality of the three regions. The author points out, for example, that “CSR debates in Africa have historically been framed in terms of the ethics of colonialism and apartheid and the prevalence of corruption and fraud on the continent.” Young managers must reinforce this analysis through ethical values incorporated by them, like the fight for human rights, threatened by the frequent civil wars in the African continent.
Asia, in turn, is described as a region where CSR advances at a rapid rate. For instance, almost 75% of large Indian companies have stated developing CSR policies. But would that be enough to improve the Indian (and Asian) reality, characterized by child labor, very low salaries and inhuman work conditions – in many cases for multinationals from developed countries?
For Latin America, the CSR agenda would be “heavily influenced by the socio-economic and political conditions, that worsened many environmental and social issues like deforestation, unemployment, inequality and crime.” (Visser, 2009). Managers and students must combine those aspects to the CSR initiatives that are taking place in Brazil, Mexico and Argentina, and that, according to some analysts, could create some hope for positive changes.
Drivers of CSR in Developing Countries, Visser, W., 2009.
CSR Pyramid for Developing Countries, Visser, W., 2009.
By the end of the article, Visser lists 10 distinctive characteristics of CSR in developing countries. We highlight three of them:
- In developing countries, formal CSR is practiced in most cases by large multinational or domestic high-profile companies, especially by those that have an international brand.
- Making a financial contribution is frequently seen as the most important and effective way a company can have a social impact, for example, through investment, creation of employment, payment of taxes and transference of technologies.
- Countless CSR issues in developing countries are presented as dilemmas or stressful choices: development versus environment, creation of employment versus higher work standards, strategic philanthropy versus political governance.
To conclude, we can understand why managers all over the world study the impact of CSR in companies or countries. The social dimension of a company will never be its main purpose – that is the pursuit of profit – but it is here to stay.
The dilemma for managers and students is the following: working in a company that seeks maximum profit for its shareholders or in a company that, besides that, acknowledges its obligations towards the community, the environment, employees and customers? The Economist (2019) reaffirms the attractive aspects of the CSR alternative: “Young people want to work for companies with a clear stance on today’s moral and political issues.”
The choices of young and future managers will show the values they received during their education and training. Schools with a more ethical view support an ensemble of values expressed in the curriculum and in how the relationship with the university community and with other stakeholders is managed. Defense of the Rule of Law, Democracy, basic Human Rights, Freedom of Expression and of Thought are issues that students incorporate into their vision of the world. Such schools try educating managers who are aware of the impact managerial decisions can have on society and the environment. For this purpose, a university environment adapted for collaboration and exchange of ideas is created, where ethnic, cultural, gender and sexual orientation diversity is respected and valued. Diversity enrichens debate, bringing different perspectives for the members of the community.
It is important to remember that CSR companies, such as Microsoft, are not the only ones where managers will find a healthy work environment. As The Economist states (2019), if share ownership is broadened, “most owners and firms will opt to maximize long-term value, as that is good business.”
And what about young managers who get job offers from companies that seek, through any means, maximum profit in a very short-term? Well, there are plenty more fish in the corporate sea!
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References:
- Big business, shareholders and society: What companies are for (August, 2019). The Economist. Retrieved from: https://www.economist.com/leaders/2019/08/22/what-companies-are-for
- Devices Sustainability at Microsoft. (2019). Microsoft. Retrieved from: https://query.prod.cms.rt.microsoft.com/cms/api/am/binary/RE4d74y
- Feloni, R. A major nonprofit ranked U.S. companies for doing the best for their communities, workers, and the environment, and Salesforce and PayPal made huge jumps from last year. (November, 2019). Business Insider. Retrieved from: https://www.businessinsider.com/just-capitals-best-companies-ranking-2019-1
- Microsoft’s commitment to sustainability (n.d.). [Microsoft CSR policies]. Retrieved from: https://www.microsoft.com/en-us/corporate-responsibility/sustainability
- Statista. (n.d). [Microsoft’s Net Income - 2002 to 2019].
- Visser, W. (January, 2009). Corporate Social Responsibility in Developing Countries. The Oxford Handbook of Corporate Social Responsibility. Retrieved from: https://www.researchgate.net/publication/318094922_Corporate_Social_Responsibility_in_Developing_Countries
- 2020 Overall Rankings (2019). Just Capital. Retrieved from: https://justcapital.com/rankings/