KPMG and CSR – or why we’ve moved on to corporate accountability

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Sorry to bang on about KPMG, but there really is quite a lot in their report on the future of the taxation which is worthy of comment. One such issue is that of CSR. As they note:

Tax has come onto the CSR agenda in the last 12 to 18 months

Mike Kelly, Director of Corporate Social Responsibility (CSR) at KPMG, spoke on ‘The role of CSR’ at the symposium. He described CSR as:

a facet of business management that operated either as a ‘risk reduction strategy’ for those businesses that need a ‘licence to operate’ from society (such as the extractive industries) or as an effort to obtain competitive advantage by ‘enhancing the brand’. While the term CSR is of recent origin the concept can be traced back to the nineteenth century and beyond. What is new is that today’s debates are conducted at the intersection of development, environmental and human rights considerations.

And this shows just how out of step KPMG and I are. And, as I have noted below on the taxation issue, I’m not alone in this case either. Many of those who once thought themselves CSR practitioners, and many who were considered CSR academics have now moved on to either describe themselves as ‘corporate responsibility’ or, better still ‘corporate accountability’ practitioners and thinkers.

The reasons are obvious. First of all, CSR thinking (for example, of the sort the Quakers did in the 19th Century when they were so powerful in the establishment of many UK companies such as Lloyds, Barclays, Friends Provident, Cadbury’s, Rowntree’s, Fry’s and so on) has always been about thinking beyond the bottom line. Of course, as the Cadburys proved, being a responsible employer who considered the welfare of their staff did help profit, but let me be absolutely clear. That was not the motive, as KPMG suggest it is in their definition of CSR.

Nor was there any matter of ‘need’, which contrasts with KPMG’s suggestion that some companies might undertake CSR because they require a licence to operate (which all do, in some way or other, as appears to have escaped their notice). These companies undertook an action because society was the better for it. As members of society they indirectly benefited as a result. That was a stakeholder driven concern.

Did that make it voluntary? It did, of course, in those days. Does that mean it should remain so? Yes, in the sense that any business can operate to standards above those required by law. But equally, and unambiguously, those who suggest that the voluntary nature of CSR is an essential feature of it entirely miss the point about the motivations of those who do voluntarily exceed the requirements of law. They do so because they think the requirements of law are not good enough, and that the law should be changed. Only then is this ‘responsibility and not ‘compliance’.

But when the desire is for standards of behaviour that require the conduct of business in accordance with the ethical standards of transparency that are a pre-condition of markets working effectively for the benefit of all (something to which I aspire) and therefore for the benefit of both shareholders and stakeholders alike, this is not about responsibility, but accountability. And that’s not an issue on which we can rely on goodwill in the long run. That’s an issue where compulsion will be required or that licence to operate should be withdrawn. So CSR is a step, and one that is being fast overtaken.

In that case KPMG have a long way to go. They’re still struck with Friedman and his maxim that ‘the business of business is business’. He was as wrong on that as he was on the importance of monetarism (and he has at last conceded the latter). So are KPMG.

Note: Declarations of interests: I have been a member of the Religious Society of Friends (The Quakers), was a founder member of The Quakers and Business Group and co-wrote their book 'Good Business: Ethics at Work'