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Corporate Social Responsibility Hits Critical Mass

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Each and every year that passes possesses its share of themes in the investing realm. One positive theme in 2010 has been the idea of corporate social responsibility, or CSR, which has cropped up time and again.

This concept has reached beyond being largely dismissed as a fringe, esoteric concept, now part of mainstream thought (and controversy).

Profits and principles
Folks are noticing this shift in attitude. One of them is Forbes and's Aman Singh Das and Andrea Newell, who've noticed an explosion in dialogue on CSR. Traditional business news sources have also increasingly covered this arena on the pages of Fast Company, Harvard Business Review, Stanford Social Innovation Review, and Forbes' CSR blog. They also remind us of high-profile articles on the topic in The Wall Street Journal (see my reaction to that particular op-ed) and The Washington Post.

It was a year that highlighted many corporations that didn't seem like they were operating at the height of what anybody might dub "responsibility." BP (NYSE: BP  ) , Massey Energy (NYSE: MEE  ) , and Toyota (NYSE: TM  ) all spring to mind as good examples of irresponsible corporate behavior gaining a high profile in 2010.

However, many companies either showed their mettle in this arena or even made moves that prompted the idea that the bottom line may not be more important than ethics. Unilever (NYSE: UL  ) recently revealed an aggressive plan for sustainability, and Google shocked modern profit-driven business leaders by revealing Sergey Brin's hard stance against China's authoritarian censorship, accepting the risk of putting the brakes on doing business there despite the promise of copious growth opportunities.

Indeed, some of us believe profits should never trump certain principles.

Over the long haul, bad guys finish last
Newell and Singh Das point out that if CSR has been gaining ground in terms of fertile fodder for robust discussion and corporate change in 2010, it's likely because many surveys and studies reveal that consumers want to feel good about the companies they support through their pocketbooks. Singh Das cites several studies that provided numbers to back that stance, such as Edelman's 2010 GoodPurpose study, which revealed that 87% of global consumers believe corporations should attach at least as much weight to social interests as business interests.

A "good reputation" in its many forms can be a boon for today's public companies; losing a good reputation and looking like a big bad guy can be a huge liability for a company and its shareholders.

I recently wondered if Johnson & Johnson (NYSE: JNJ  ) -- a company that has long enjoyed a stellar reputation with consumers (including a spot with Kraft Foods (NYSE: KFT  ) and Walt Disney (NYSE: DIS  ) atop a list of companies regular folks find "most socially responsible") -- might be on the road to a ruined reputation because of its recent and relentlessly long list of product recalls.

Do the right thing
Granted, CSR initiatives always run the risk of turning out to be flimsy PR campaigns rather than any real substantive change. BP was a good example, since its "Beyond Petroleum" motto turned out to be a tagline that sounded warm and fuzzy but didn't hold up well to reality after the Deepwater Horizon disaster and Gulf oil spill. Consumers (and investors) should be wary of CSR window dressing.

Still, the fact that more and more corporations are responding to consumers' wishes for more socially responsible policies (leaving many pundits to react pretty violently to what may be a shift away from "short-term-profit-over-all" attitude), points to the possibility of a brighter future in terms of businesses that profit by doing the right thing in the long run. Shareholder revolts have started to revive the concept of responsibility in 2010, too.

If the CSR conversation really heated up in 2010, the CSR conversion to a corporate landscape with far more responsible businesses could be on fire in 2011. Better businesses mean better profits over the long term; investors should think about reinforcing their returns by seeking out the most socially responsible businesses around for their portfolios in 2011.

Check back at every Wednesday and Friday for Alyce Lomax's columns on corporate governance.

Walt Disney and Google are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers choice. Walt Disney is a Motley Fool Stock Advisor selection. Unilever is a Motley Fool Global Gains recommendation. Johnson & Johnson and Unilever are Motley Fool Income Investor selections. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of Google and Johnson & Johnson. Motley Fool Alpha owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2010, at 10:07 AM, ethicsblogger wrote:

    Unfortunately, this article doesn't make the distinction between CSR and basic business ethics. That's not surprising, because most CSR advocates aren't clear about the distinction either. There's a huge difference between saying that businesses have ethical obligations -- including obligations to make sure their products are safe and effective, obligations to clean up their own messes, etc. -- and saying that companies have extensive obligations to 'contribute socially', which is what is typically argued under the heading of CSR.

    Chris MacDonald

  • Report this Comment On December 31, 2010, at 10:10 AM, TMFLomax wrote:


    Thanks very much for bringing up this point, which is interesting to think about. When companies have negative social effects, it's easy to say they have ethics and vice versa, but it is good food for thought that perhaps there's an extinction. Thanks for the point for discussion.



  • Report this Comment On December 31, 2010, at 10:10 AM, TMFLomax wrote:

    Oops, I meant, when companies have negative social effects, it's easy to say they have behaved *unethically* and vice versa.

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