4 factors that block CSR

How realistic is the popular business mantra: “doing well by doing good”? 4 key factors undermine the veracity of this hopeful slogan, according to research covered by Knowledge@ HEC this month.

Armed with extensive evidence of the link between long-term financial performance and CSR, mainstream business leaders are joining the call for business to contribute to the greater good. Danone CEO Emmanuel Faber even argues that today this approach1 “is the only serious (business) approach”.

This month, however, I had a slightly depressing wake-up call about the formidable obstacles still standing in the way of change. HEC Paris’s Afshin Mehrpouya and Pace University’s Imran Chowdhury report that the link between social and financial performance is actually far weaker than is often said.

“Ultimately, it seems, in many situations, the financial rewards are insufficient to drive socially responsible business activities,” they report. What’s worse, that link is set to weaken only further moving forwards. Speaking of a “multitude of phenomena,” the researchers highlight the following 4 factors:

1) Intensifying shareholder pressures for short-term returns

2) Increasing distance between consumers and producers thanks to globalization

3) Explosion in BtoB services — thanks to vertical disintegration – which are less image-conscious than consumer-facing companies

4) Increase in market concentration, creating more vulnerable consumers and workers in the face of powerful conglomerates and monopolies

“Instead of blind adherence to this mantra, it is important to question it and to reinforce the mechanisms that actually make it work,” Prof. Mehrpouya argues. Such mechanisms include better ethical training for managers as well as another mechanism of particular significance for us here at Business Digest: better coverage of firms’ actual behaviors to create more rigorous public debate.

Learn more: “Why Doing Well by Doing Good is not as Simple as They Say” by Afshin Mehrpouya and Imran Chowdhury (knowledge@HEC 2018). 1. “Danone : Emmanuel Faber expose sa vision sociale de l’entreprise”, interview by Elizabeth Martichoux (RTL Matin, 6 November 2017).

Since its creation in 2008, Business Digest has partnered with Knowledge@ HEC in the publication of over 150 articles showcasing the academic research of teachers and instructors at HEC Paris