Business is social by nature – even without a “CSR” agenda

One of the more irritating suggestions that people make in the debate about “corporate social responsibility” (CSR) is that “businesses should put something back into society”. Entered into google as a string, the phrase produces 21.7 million hits, with small variations producing many millions more.

I sometimes wonder, when I go to the local newspaper shop and purchase a newspaper for £1, whether I should say to the vendor before I leave – “having sold me a newspaper, I hope that you will now put something back into society”. Getting up at 5am, taking risks with very little capital to fall back on and providing communities with newspapers at a reasonable price is not enough it would appear.

Of course, when people use that line of argument, they are not talking about the corner shop, they are talking about Tesco, or Starbucks or PC World. But the argument is the same. Why if Tesco profits from selling a newspaper is it time for them to “put something back into society” whereas if the corner shop sells a newspaper people appreciate that they are providing a good service at a reasonable price?

The raison d’etre of a business is to put something into society by being a business. The provision of cheap and plentiful food in good condition; the development and supply of computers with ever-greater functionality; the provision of a cup of cappuccino that does not involve the buyer having to go through the expensive and laborious process of buying the machinery and making the coffee himself are all activities that put something into society. Why is it that businesses are caricatured as “taking out of society” when they behave as businesses but “putting something into society” when they spend money on community projects and the like?

More generally in the debate on corporate social responsibility, there should be no reason for businesses to make a special effort to be “social”. Business, by its nature, is a social activity. Businesses are free associations of persons put together for a common objective. That common objective, furthermore, can only be achieved by interacting with others in the community – mainly by providing goods and services that people wish to buy.

Should businesses be responsible? Of course they should. All individuals and all organisations should behave in a civil and responsible manner. However, this does not require businesses to have specific objectives that might, indeed, undermine their whole purpose. In fact, proponents of corporate social responsibility – that is proponents of businesses having specific programmes and objectives that explicitly promote aims other than maximising owner value – seem to want businesses to undertake tasks for which they are not suited but towards which other corporations and associations are, in fact, specifically oriented.

The latest edition of Economic Affairs covers these issues in more detail with articles from Elaine Sternberg, David Henderson and Stephen Copp, with Sushil Mohan and Alistair Smith writing specifically about fair trade. Enjoy Christmas, but please don’t campaign for businesses to behave like Santa Claus.

4 thoughts on “Business is social by nature – even without a “CSR” agenda”

  1. Posted 24/12/2009 at 11:02 | Permalink

    It seems to me that a voluntary exchange is expected to benefit both parties to it, because their subjective valuations of the things being exchanged are different. ‘Expected’ to benefit, because there can be mistakes, fraud, etc. I agree with Philip: why should any further justification be necessary?

    Menger makes a telling point in his ‘Principles of Economics’ at the beginning of chapter V ‘The Theory of Price’, when he explains that the things exchanged are not ‘equivalents’ in value. If they were, he says, there is no reason why every exchange should not be capable of reversal. ‘But experience tells us … neither of the two [parties] would give his consent.’

  2. Posted 24/12/2009 at 13:50 | Permalink

    Excessive taxation at present -and as a trend- reflects this “businesses should put something back into society” nonsense. So its not only the ignorant populace saying this, it’s government at its core. They should know better and unfortunately they don’t.

    An added problem is that recklessness is getting imported from the US: love for deficit, “tomorrow we won’t be here” line of thought, government intervention as a drug. The UK is following this American trend just in the same way it did when following the US in a prolonged invasion of Iraq.

  3. Posted 06/01/2010 at 16:41 | Permalink

    Indeed one should put something back after selling a newspaper, and it is never enough as poverty levels currently rise. The issue here is who should pay to alleviate poverty? The Government/taxpayer does not seem to be an acceptable in your work. So, why not small/large business? Who else is there? Charities, religious and otherwise, Womens Institutes, Churches, private wealth owners, and others may contribute, but is not likely to make much diffrerence.
    Business do not just make profits; they make tax payments, give employment etc.. They are already more “social” than you allow.

  4. Posted 07/01/2010 at 13:11 | Permalink

    I agree with your point, but there is an important proviso. That the transactions of business already make social contributions is more true for some businesses than it is for others. In particular, there are some businesses that reap a profit by virtue of not paying the full and true cost for the resources they consume. e.g. the paper industry provides a benefit to society by manufacturing and selling paper at desireable prices. But they also exact a hidden cost, by destroying an irreplaceable resource of global importance. In some people’s opinion, the net value of the industry as a whole may therefore be negative. In such cases, the business does have a debt to repay to society.

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