Enlightened Self-Interest

In their new book, Multi-nationals in their Communities, two British academics look at well-run CSR projects and how they help the communities where they operate. Ian W. Jones, a management lecturer at Oxford University, and Michael G. Pollitt, a reader in business economics at Cambridge University, co-direct the Ethics, Regulation and Globalisation project at Cambridge’s Centre for Business Research. Time talked to them about the challenges and benefits of good corporate citizenship.

TIME: Let’s start with an example of a corporate citizenship program that works well.
Pollitt: One we found very impressive was a project run by the large mining company Anglo American in South Africa. They set up a venture-capital fund for local black entrepreneurs who were setting up small businesses. Mainly these businesses were aimed at supplying services and goods to Anglo American mines. This project not only provided financing, it gave training. It also provided access to the purchasing managers of a major multinational. So, it was an excellent project which helped local communities and leveraged the expertise of the company itself.

TIME: Is it key to leverage that expertise?
Pollitt: We would argue very strongly, yes. There is a basic benchmark: the money that you put into these projects should do more than it would do if you simply handed it over to a charity. That means running projects that have some relationship to your business, or to business in general. So health-care companies doing health-care projects seems very sensible.

TIME: How necessary is it to spend heavily in order to do this well?
Pollitt: It’s not about the amount of money spent on programs, it’s about the effectiveness. It’s about answering the question, “Is this getting value for society and for shareholders?” If it’s not, they’re doing it wrong.

TIME: What are some ways in which it does go wrong?
jones: There are examples of companies being pressured by local communities to build a hospital or town hall in exchange for the right to build a pipeline. But the truth will out … If you start doing those things, at some point you get pilloried for it. If [projects] don’t have value or a strategic purpose or if they are slightly cynical, then those are the things that it’s absolutely right to criticize.

TIME: Strict free marketeers might argue that corporations already pay taxes to governments to deal with social and environmental problems.
Jones: But if, by engaging in the community, a company can do more good than just by putting money back into society through its investors, it should do so … Equally, there is some transfer of learning back from the community into the company, so that it understands more about the issues. The real question is, who adds value most? Also, charities today can become commerce tomorrow. A Vodacom project to provide micro-financing to local entrepreneurs bringing mobile communications to remote areas of South Africa is on the cusp of becoming a major business.

Pollitt: It’s all about innovation. Capitalist companies are awfully good at intervening in response to problems. One of the nicest things about CSR is the extent to which it takes real community problems or issues in the way companies do business and innovates responses to them. What we see among leading exponent companies of CSR are really innovative solutions to local business-related problems. When an ethical issue emerges, initially it’s only the leading, most enlightened companies that come up with any sort of response. And once they’ve demonstrated that these responses are effective, they can then spread that best practice to other companies.

TIME: How can you determine if a project is beneficial?
Jones: It’s very difficult to tie down. But companies [can] go and do market research, ask questions: “How has our reputation changed in the community? What do our people think about us?”

Pollitt: This is an area where the charity sector is continuing to develop effective measures of the impact of community projects. There are ways to assess success by looking at outcomes. If it’s a venture-capital project, how much business is created? How many jobs are created? The best companies do employ these methods.