By now, many people privy to the social sector have read the controversial op-ed recently published in the Wall Street Journal, “The Case Against Corporate Social Responsibility,” by Professor Aneel Karnani.  This article caused an uproar of monster-truck force sparking discussions abound both in favor and against Karnani’s viewpoint  The purpose of this blog post is not to debate the merits of that article as my colleague Cheryl Davenport provides a succinct response to this article in a recent Thoughtscrap.  Rather, I’d like to focus on the recent webinar hosted by the PR firm Fenton, the “Great CSR Debate.”

My primary objective for viewing this webinar was to see how Professor Karnani and Chrystia Freeland would respond to a deeper interrogation of their perspectives on CSR without the ability to hide behind simply write an article about it.

The result?  A back-and-forth debate on the CSR semantics with instances of passive agreement.

While there were some points of actual substantive discussion, Karnani and Freeland took a markedly softer approach in discussing CSR than their respective articles would suggest (Freeland's can be found here).  When asked if there are companies that were an exception to his article, Karnani responded (paraphrased):

• Companies should take action to increase profits and take better welfare action.  Friedman would want CSR.  Companies have a fiduciary responsibility to take into account social and technology issues to make more profits.

Interesting; didn’t expect that coming.  Additionally, Freeland later stated (paraphrased):

• There is a vested commercial interest in defending CSR and companies should make money by being in favor of CSR. 

(*Note: Shame on Fenton for not explicitly stating that a magic show came with this webinar!  Within a matter of minutes…poof!  Two CSR advocates instantly appeared on stage!)

To Professor Karnani and Ms. Freeland: yes, your words of CSR is the perspective of the new generation of CSR advocates.  Traditional CSR of abiding by the social contract is non-controversial; it is simply not enough to be just be “not-bad.”  In order for companies to differentiate in the marketplace today, companies must use CSR social innovation to extract business value from social change – a view held by GE and Campbell’s, corporations also represented in the webinar. 

Matthew Bishop, US Business Editor of The Economist, puts it in a way that even Karnani and Freeland can understand: 

• Shareholder demands are changing and the struggle of determining what tomorrow’s markets are going to be is a question that CSR (or corporate citizenship as GE prefers to call it) can help solve, especially given the increasingly high attention the public (read: consumers) are giving to social issues.

(Note: Christine Arena, the webinar moderator, has some nice commentary located here.)

I would like to close by presenting a fascinating working paper that recently came out of Harvard Business School, that I would strongly urge Karnani and Freeland to read as soon as possible.  Ioannis Ioannou of London Business School and George Serafeim of Harvard Business School are currently studying the effects of CSR programs on corporate value.  The paper “The Impact of Corporate Social Responsibility on Investment Recommendations” is one of the first real empirical studies tying the presence and effectiveness of CSR programs to corporate value creation within equity markets through the lens of investment recommendations by security analysts.  A major finding of the paper, which could further weaken Karnani and Freeland’s arguments, is that the presence of CSR programs had a negative investment impact during its early years of 1993-1997.  This is not too surprising as this perspective likely followed Friedman’s view of CSR as an increased cost absent incremental business value.  However, 1997-1999 marked a turning point for CSR as analysts viewed it as a value-creating mechanism.  I will be particularly interested in how this research unfolds because of its clear implications to what was probably the most defining quote of the webinar:

• “Great companies don’t see it as CSR; they see it as corporate strategy and good management.”