Wednesday, May 26, 2010

Lead, Follow, or Get the Hell Out of the Way! - or, Governments and the Role of Regulation in CSR

There have been several discussions in recent months in the blog space regarding the role and value of government in the monitoring and setting of regulations regarding corporate social responsibility (CSR). Perhaps the most radical and visible discussion occurred as a result of a proposal put forth in the Indian legislature that suggested that CSR activities could be traded across companies in a manner similar to the notion of purchase, trade and barter of carbon credits. Such a proposal is rife with difficulties, not the least of which is the assumption that a “right” net amount of CSR activity could occur, allowing corporations to purchase “get out of jail free cards” to mask their environmental or social ills…and that that equation would suffice for people and planet.

This paradigm is culturally dependent however, as the role of government in India is different from the role of government in the US and again different in Canada. An inherent assumption from a North American context is that in order to keep government regulation at bay, industries or indeed corporations must be responsible for self-governance. It is fundamentally an equation, whereby increased autonomy will increase the burden of responsibility to contribute to the greater good; conversely – increased dependency on government programs decreases overall autonomy and by default decreases the innate sense of responsibility to society. It was once stated (by an unfortunately forgotten source) that it is not the role of government to provide all programs, but rather to ensure that all programs are provided.

If one accepts these assumptions, the role of government is not to legislate compliance to a CSR yardstick, but instead to support societal expectations of all constituents, personal, public, and corporate to declare a responsibility to contribute to the social and environmental good. This leads to one of three options running their course. 1. A corporation sees their responsibility to society and fulfills it – this allows them to be valued on a variety of levels, and they continue to do business. 2. A corporation abdicates their responsibility and chooses to do nothing but take from their community and the planet in a short-term race toward profit. – This corporation will lose its competitive advantage as it engages in socially and environmentally unsustainable behaviors – ultimately they will cease to exist. 3. A corporation chooses to flaunt civil standards and commits human rights or environmental abuses – here, the government steps in – and seeks fines or jail terms in order to create some kind of redress of the wrongs committed against society.

Now, this is a simplistic view of government and CSR – and does not address many of the nuances in the continuum of behaviors outlined above, but the fundamental premise is that corporations will step up and have impactful and meaningful CSR strategies not because of some government mandate, but because it meets their responsibility as members of the community.

Is there a fourth paradigm for companies to pursue? Should government be more involved in setting this agenda? Please leave comments at

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