Article on Corporate Social Responsibility by Philip Booth in The Tablet

In a recent book Catholic Social Teaching and the Market Economy, published by the Institute of Economic Affairs, nine economists and theologians from around the world came firmly to the conclusion that the market economy was the best way to promote economic development. They also concluded that it was the form of economic organisation most compatible with Catholic social teaching and the nature of the human person. However, the authors pointed out that, if a market economy is to be at its most effective in promoting the common good, it needs to be underpinned not just by the rule of law but also by an ethical framework. The corporate social responsibility (CSR) agenda may, for some, provide that moral framework. I am sceptical.

Those who promote the CSR agenda have chosen an ideal marketing slogan. Who can be against corporate social responsibility? Surely nobody believes that firms should be irresponsible. Thus various parties, including campaigning groups, charities, investors and governments, pursue diverse agendas under the one heading. These programmes range from radical programmes that will undermine the most important role of firms – that of creating wealth – to an ethics-free programme of window dressing simply designed to make the company more attractive to customers: Enron was the leading proponent of CSR in the USA! Cafod, for example, positively endorses government regulation to require firms to produce a comprehensive operating and financial review; this would be a boon to big firms as they gain a marketing device whilst imposing disproportionate fixed costs on smaller competitors.

But there are specific ways in which Catholic social teaching can help us develop our thinking on ethical behaviour by businesses. We should ignore the slogans and think about what constitutes virtuous behaviour in the very difficult circumstances in which companies often find themselves working. As in many areas of Catholic social teaching there are often substantial grey areas that are left for prudential judgement.

In the normal course of events firms can be guided by the profit motive when deciding which business decisions add greatest economic value. However, Catholic teaching indicates that there are circumstances when following this rule of thumb might not be appropriate. For example, the Catechism states clearly that businesses should be responsible for the economic and ecological effects of their operations and not just an increase in profits (para 2432). We are also told of the importance of a strong juridical framework within which businesses should operate. Such a juridical framework should ensure that normal business decisions, guided by the profit motive, generally promote the common good. Indeed, by strong protection of property rights and enforcement of contracts, it should also ensure that businesses are held responsible for the impact of their decisions on the environment.

When such conditions exist, we tend to find that a free economy raises the condition of rich and poor alike and promotes the common good: that is certainly the experience of Western Europe and much of Asia, Australasia and North American. There remain ethical dilemmas for businesses of course – particularly when they operate in a non-Christian and materialistic culture. However, some of the most acute ethical dilemmas for businesses exist in countries where there is no effective rule of law and protection of property rights.

In poorly governed countries businesses should always respect the basic moral law and natural law. Thus it would not be right for a business to take property without compensation or pollute the environment without compensation, even if the law of a particular country allowed it. But there still are grey areas where businesses face dilemmas that they cannot necessarily resolve objectively. Many activities, such as mining, cause harm that might well be tolerated in countries with good governance systems because the benefits are greater than the costs. It is certainly not immoral, as such, to develop open caste mining in a developing country with a poor system of legal protection. However, the Christian business should ensure, in the absence of proper legal protection of property rights, that all those who would justly receive compensation for the loss of their property or amenity in a well functioning, just legal system are properly compensated in some way.

Of course, businesses in countries with poor legal environments need to be especially careful not to engage in bribery and corruption with the government. While some of the dilemmas that businesses face in countries where basic conditions of good governance do not exist can be very difficult to resolve, it can surely never be right for a Christian in business to knowingly break moral laws in collusion with the governments of the countries in which they operate.

Closer to home, businesses face ethical dilemmas because of the vulnerability of those with whom they contract and work. Recently Pope Benedict examined some issues related to ethical business conduct in a talk to an Italian entrepreneurs group. He said: “all business enterprises are to be considered primarily as groups of people, whose rights and dignity must be respected.” He also urged entrepreneurs to protect the jobs of their workers and offer real prospects to younger workers.

This requires further discussion. If companies cannot use more profitable production techniques or reduce employment to increase efficiency, even if the profitability of an enterprise is not in peril, labour will not move from less productive to more productive sectors of the economy. This, in turn, can exacerbate unemployment by making labour less productive relative to capital. Preserving particular jobs can be at the expense of preserving a climate in which those who are unemployed can easily obtain employment. It is not, of course, remotely possible for an employer to determine whether any particular decision to make labour redundant promotes or subtracts from the overall common good, given possible impacts of the employer’s action on other parts of the labour market. Indeed, we can see in France the results of a policy of trying to protect particular jobs within businesses. The consequences for young people in particular have been catastrophic.

The problems described in this article cannot be resolved by CSR box ticking or by following a CSR agenda that latches onto the latest fads. There is too much danger of window dressing or of management running the business in their interests and not in the interests of owners. What is needed is that Christians in business have the right attitude towards their “neighbour” so that they can weigh up individual decisions in the light of the moral law and concern for all those who are part of the business community – workers, owners and contracting parties. What is needed, in fact, is an “attitude of solidarity”. Too often, the requirement for solidarity is treated as call for political action. Instead, solidarity is seen, in the first place as “a firm and persevering determination to commit oneself to the common good; that is to say to the good of all and of each individual” (Sollicitudo rei socialis, 38). The virtue of solidarity requires that we respect persons for their dignity as persons. This is what we should do in business. Such an attitude of solidarity will not lead an employer to avoid difficult decisions such as those about retrenchment. But it should lead an employer or manager to be continually sensitive to the vulnerability of all those with whom he deals.

see also
The Tablet and
Catholic Social Teaching and the Market Economy by Philip Booth