Corporate Social Responsibility (CSR) is a Veblen good. CSR exhibits as a corporate woke. In meeting the wants of materialistic possessions, presumably natural resources are plundered. The resources being non-renewable suffer from exploitation reaching a stage sometime in distant future wherein there will be no resources available for production of future goods and services. In destruction of natural resources, humans in their alleged selfish motives destroy the environment thus laying the foundation for prospective future calamities. Corporate driven capitalism models in pursuit of short term profits destroy resources without inhibition thus allegedly the primary culprit in environmental degradation and destruction. To critics of capitalism, it is not people who demand things but corporates in their goal of profit maximization manufacture demand. As a saying goes, corporates will sell people ropes so that they can hang themselves! Moreover, the resources per se have no ownership, thus belonging to society in what might be termed as common property resources. The government as an agency of society has allocated the rights to exploit the resources to capitalist entities who from being trustees of the resources have converted the same into private goods. In resolving the apparent tragedy of commons, conversion into private goods has led to socio-eco-cultural displacement of sorts.
The narrative of an all-evil corporate making people their slaves either as labour or consumers in generating increasing profits without mercy for resource conservation in entrenched in the societal mind. Reasons exist with sufficient validity for inherent suspicion of corporate activity. From medieval and post medieval imperialism to state backed corporate regulatory capture overseas to modern forms of creeping state backed imperialism to internal regulatory capture, corporate exploitation of state and society have been well documented.
Irrespective of the merits in the current anti-corporate activism, anything that goes against the ingrained narrative is perfect recipe for inviting personal attacks bordering on character assassination. To be sensitive and tolerant to organizations and individuals in forefront of alleged nature and resource conservation, anti-corporate activities is demonstration of being aware of the natural degradation that is supposedly happening. It is an equivalent of economic woke. Therefore, corporates are expected to attune for these dissident activities. Moreover, theoretical advancements suggest corporate objectives expanded to meet stakeholder satisfaction than wealth maximization of shareholders as conventionally assumed.
A by-product of the above debate was the emergence of CSR as a concept. Corporates are expected to be socially sensitive and thus expected to return to the society something constructive for the resources they are alleged to have exploited in pursuit of their profit objectives. In India, it went further in making corporates set aside 2% of their profits towards mandatory CSR expenses. Though non-expenditure was made criminal offence, better sense prevailed and it seems to be getting dropped. Yet there is a problem with the mandatory CSR as a concept itself.
To reiterate, in theory, CSR is supposed to be corporates giving back to society what they have taken from, yet in practice and logic, it is something different. All that CSR law seemed to suggest was corporates spend a percentage of their profits on so-called social needs to shed their accumulated 'moral guilt'. Implied is CSR act fixes the price for this internalizing the externalities generated. CSR thus morphs into a euphemism for price to be paid for 'resource exploitation', 'producing externalities' 'land acquisition' etc. The price thus fixed washes away presumed 'moral guilt' of corporates for their 'alleged actions' affecting socio-eco-cultural fabric.
Moral persuasion through individuals and organizations was the first resort for reducing corporate exploitation of natural resources. At times they have bordered on sever aggressive tactics. Physical protests, destroying corporate infrastructure is not unknown by people presumably at the receiving end of corporate activities. There have been known boycott of goods produced by corporate units through unfair means or exploitative means. Concepts like third and fourth party certifications, fair trade symbolisms etc. were outcomes of several moral and physical pressures exerted through various on capitalist and quasi capitalist enterprises. In fact corporate woke is a product of these moral pressures. The corporates are forced to acknowledge the other side of the story and create a feeling of moral guilt. The CSR tax was a pathway to convert this moral guilt into a financial incentive. However, as with any conversion of moral to financial, there are unintended consequences.
In Israeli town of Haifa, the day care centres usually closed at 4 PM. Parents were expected to pick up their kids by 4.00 PM. There were of course a case of two wherein the parents picked up their kids late. The centres did not charge anything for late pick-ups. Their staff continued to be on duty and take care of their kids till such time parents came and picked them up. Rare was the case when parents picked up beyond 4.30 PM. The reason of course was moral guilt. There would be sort of moral guilt in the parents that because of their lack of punctuality, they were making the staff wait and work for extra time. There was nothing equivalent of moral price. The day care centres introduced as an experiment levying fine for late pick up. Contrary to expectations, the late pick-ups actually increased. The parents did not have any moral guilt now that there a financial incentive. The fine was equivalent to price for delay in pick up and thus over time spent by the staff in taking care of their kids. A detailed study of this experiment is available at https://t.co/5U8iYjGuaf?amp=1 . The CSR tax in India can be best described as the corporate equivalent of the Haifa experiment. The corporates can now shed their moral guilt if any and the tax is price for their socio-eco-cultural misdemeanours.
In fact, business organizations are not expected to provide social goods for charity. Social goods might carry with them the free rider problem thus a potential candidate for market failure. Market failure is conventionally addressed by government provision of the said goods. The government cannot transfer the same to corporate entities on grounds of so called CSR. If there are inefficiencies that prevent government from effectively functioning in allocation of social goods, transfer of responsibility cannot be a solution. If the government is keen on involving corporate bodies in provision of socio-public goods, there are sufficient reasons to incentivize the same. The government can facilitate creation of a market design for socio-public goods. The new market models generated with profit potential could incentivize corporates venture into social domain. Socio-public goods like hospitals, education are quite often provided through trusts or non-profit mechanisms, whose unintended consequences are linked to conversion of black to white money etc. Barriers of entry might be eased to facilitate for-profit production of social-economic-cultural goods.
The government as an agent of the society has to manufacture the 'self-interest' that will make corporate venture into. Nobody is altruistic, neither is expected to be. In fact altruism is itself linked to self-interest, a long term prospective reciprocal altruism. One is altruistic today so that she can receive the reciprocity when she is desirous of so. There is a pressing need to demonstrate self-interest essential for provision of social goods and how market best handles it. Contemporary models revolve around paternalistic approaches. These top down models whether benevolent or otherwise are likely to flounder in the mid to long run. There must be an urge to opt for radical surgery not tinkering. Corporates might want to demonstrate woke, thereby hardly any criticism from corporate leaders on CSR, yet in practice they find multiple ways to circumvent the same. This is the tragedy of CSR.
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