? ? ? ? ? ? ? ? ? The issue of corporate social responsibility (CSR) affects our everyday lives. It is about the jeans we wear, the fast-food joints we eat at, the coffee we drink, the cars we drive, and the paper this is written upon. Companies are more visible than ever in trying to show people that they are about more than just profits; that they can tackle the problems of child labour, workplace safety, environmental degradation, and that they can even establish their own charities, educational programs, and more. In The Market for Virtue: The Potential and Limits of Corporate Social Responsibility, David Vogel sets out to discover the true effectiveness of CSR by examining its social and environmental impact.

? ? ? ? ? ? ? ? ? First we will look at Vogel’s argument and offer some comments in the context of three other works: an article by Ronnie Lipschutz and Kathleen Fogel entitled “Regulation for the rest of us?” Global civil society and the privatization of transnational regulation, an article by Thomas Biersteker and Rodney Bruce Hall called Private authority as global governance, and a book by Benedicte Bull and Desmond McNeill called Development Issues in Global Governance: Public Private Partnerships and Market Multilateralism. In conclusion, we will offer our interpretation of the situation and come up with solutions, asserting that CSR has reached its limit, and will not overcome it until: 1) private companies team up with legitimate partners (ie: the state, multilateral organizations) as a matter of course and necessity, and 2) there is a fundamental or forced change in corporate culture that results in companies seeing CSR as a duty and a natural and essential part of everyday corporate activities. Vogel is correct when he says there is a market for virtue, but wrong in his assertion that it has produced significant changes in corporate practice. His own case studies and statistics defeat his optimism.
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? ? ? ? ? ? ? ? ? Vogel identifies CSR as “practices that improve the workplace and benefit society in ways that go above and beyond what companies are legally required to do” (Vogel, 2). He admits, however, that there are problems with such a definition because CSR is so multidimensional; for example, is MacDonalds responsible because of its children’s charity work, or irresponsible for paying its employees low wages and offering few benefits? As well, shareholders may not think it entirely responsible for a company to use its money on anything that is not intended to generate profit. Nonetheless, Vogel bypasses this and instead encourages us to see corporate virtue as something that functions like anything else in the market – according to the laws of supply and demand. The focus of the book then is on the market forces that promote and inhibit CSR.

? ? ? ? ? ? ? ? ? To explain the rise of CSR Vogel turns mostly to corporate culture, demonstrating that corporations believe CSR is good business. More than that, CSR can also improve a company’s reputation, increase efficiency and innovation, and build employee loyalty. The statistics speak for themselves: 70% of CEOs believe CSR is vital to profitability, and 91% believe it increases shareholder value (Vogel, 20). The problem, interestingly, is that there is little evidence to show that corporate virtue actually pays off. Instead, CSR only pays off for “some firms in some areas under some circumstances” (Vogel, 3). It works for some companies whose image depends on, or is based on their CSR practices, such as The Body Shop, Ikea, and Patagonia, and also works for those companies that have been targeted by activists, NGOs, etc., or are highly visible.

? ? ? ? ? ? ? ? ? There is some evidence to show that CSR may also be a response to the attitudes of consumers, employees and investors. 30-40% of consumers said they would avoid or boycott a company they feel is not socially responsible (Vogel, 47). However, Vogel explains there is a large gap between what people say and what they actually do. In a 2004 survey, 75% of consumers said they would modify purchasing behaviour in response to a socially irresponsible company, but only 3% did (Vogel, 48). Vogel also shows how CSR only sometimes works to attract and retain employees. Moreover, despite the presence of social investors and occasional shareholder resolutions, shareholders generally see CSR as a cost.

? ? ? ? ? ? ? ? ? Vogel then turns most of his attention to voluntary codes – something a company does on its own to improve social or environmental performance and working conditions. He focuses on voluntary codes in agriculture - specifically, coffee and cocoa - and in child labour, and shows that there has been limited progress. In coffee for example, he explains that although free trade coffee sales have doubled since, 2001, they still only account for .4% of global coffee purchases (Vogel, 106). He also demonstrates that the effectiveness of voluntary codes for child labour is mostly restricted to manufacturing. In any case, companies are often unwilling to bear the costs of enforcing compliance and monitoring the implementation of their codes. For instance, Wal-Mart sources its products from an estimated 50,000 to 100,000 factories and opts to delegate the responsibility of monitoring and enforcing compliance (Vogel, 89-90). Similarly, for The Gap to monitor compliance of its codes throughout its supply chain, it would have to see its profits cut by 4.5% (Vogel, 91). And this is a price most companies are unwilling to pay. Vogel here speculates that the limit of CSR may have been reached.

? ? ? ? ? ? ? ? ? The impact of these voluntary codes overall is affected by three things: 1) a firm’s vulnerability, reputation, and visibility, 2) the structure of production – for example, the more suppliers a company has, the more difficult it is to ensure compliance, and 3) the pattern of compliance monitoring, meaning compliance is high in some areas, ie: child labour and health and safety, but low in others, ie: wages, compensation, overtime restrictions, freedom of association, etc.

? ? ? ? ? ? ? ? ? Last, Vogel turns to corporate environmental responsibility, using case studies involving Shell, Home Depot and British Petroleum amongst others, and by discussing voluntary codes in forestry. The gains, in North America at least, he concludes, are “limited” and “trivial” (Vogel, 111; 127). He touts the “measurable impact” of corporate environmental responsibility, stating that a few companies have applied voluntary codes, or adhere to the rules of international private standard setting bodies such as the Forest Stewardship Council (FSC), but admits that overall, especially compared to labour standards, there are few voluntary codes for the environment. Pollution is still on the rise, and old growth, tropical, and endangered forests are still being cut.

? ? ? ? ? ? ? ? ? Overall, these voluntary standards for labour conditions, environmental practices, and human rights are becoming norms for business conduct, or part of what Vogel calls a “web of soft law” (Vogel, 162). He maintains there is a market for corporate virtue and that is has produced important changes in corporate practices; for instance: child labour is down, health and safety standards have improved in a few industries, prices paid to some agricultural producers are higher, the quantity of endangered wood products sold in Europe and North America is down, and greenhouse gas emissions for some industries in developed countries are down. Although these achievements might seem modest, he argues we should see them as the second-best alternative, and certainly better than nothing at all. For instance, it certainly would be better if India provided schools for all of its children, but if not, Rugmark and Ikea can give some children access to education (Vogel, 163). This is not to say that voluntary regulations are a substitute for good government. Vogel does not believe this to be the case, and instead contends that there is a role for both civil regulation and government legislation, beyond the way that one can become the other and vice versa. Vogel would like to see corporations make more of an effort to impact public policy; for example, Home Depot should lobby for legislation to manage forests more responsibly and Ford should support public policies that increase the market for fuel efficient vehicles (Vogel, 172). This is the way corporations and the state should work together, with civil regulations reflecting the potential of the market for virtue, and the government recognizing CSR’s limits (Vogel, 173).

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? ? ? ? ? ? ? ? ? Although Lipschutz and Fogel do not deal directly with CSR, they give us some insight into its origins, and this is undoubtedly useful in determining its destination. They argue that private actors have emerged to fill in the gaps left by states retreating from their welfare systems. As a result, we see that “regulatory authority is distributed increasingly among many centres of action, often focused on very specific issue areas and problems” (Lipschutz; Fogel, 124). Similar to Vogel’s “web of soft law”, this diffuse regulatory system plays an important role in global governance. The authors worry, however, that this simply privileges the political desires and goals of companies that are of course unelected, and therefore not representative, transparent, or democratic (Lipschutz; Fogel, 121; 123). Their view, compared to Vogel, seems a sobering one. Legitimacy, they say, is extremely important, and this can be gained by including a wide range of stakeholders in the decision making process. They point to the FSC as an example of this, but admit that where there is one seemingly legitimate and inclusive private standard setting body or corporation, there are many others that do not make the effort and simply ask that the public trust in their good faith (Lipschutz; Fogel, 136). But when, in cases like this, companies ask us to see the private good as something equivalent to the public good, as Lipschutz and Fogel skeptically jab – this is “a highly questionable proposition” (Lipschutz; Fogel, 136). We get the sense from these authors that the rise of something like CSR is very deeply ingrained in the globalizing process and in domestic deregulation, and that private regulation is perhaps something fleeting, or unreliable.

? ? ? ? ? ? ? ? ? Therefore, from Lipschutz and Fogel we get a good amount of skepticism, and the reinforcement of the problem of legitimacy. They suggest that private regulation will only work if everyone in the market is involved, and this requires corporate self-discipline or external enforcement” (Lipschutz; Fogel, 136), and this is not so different than what Vogel is saying. But one thing that Lipschutz and Fogel hit on that Vogel does not is the importance of inclusion. Vogel discusses private standard-setting bodies such as the FSC, but only focuses on some of their minor achievements and criticizes their pitiful market share and willingness to compromise standards in developing countries. While acknowledging the FSC’s role in setting a sort of global standard, what he misses is that its legitimacy and importance is derived from its ability to involve as many stakeholders as possible. Let us end here and simply say that in addition perhaps to what Vogel has suggested, let us include this: CSR practices must make as much of an effort as possible to include everybody involved; especially governments.

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? ? ? ? ? ? ? ? ? In Private authority as global governance, Biersteker and Hall define authority as the legitimate use of power, and claim that as long as there is consent and social recognition, even a private actor can be accorded the rights, legitimacy, and responsibility of an authority (Biersteker; Hall, 204) A good amount of time here is devoted to considering the concept of private authority as moral authority. Authority here is broken down into two types that must be socially recognizable and built upon consent: 1) having the expertise to do a job, and 2) being a neutral party or referee in good social status. Furthermore, these authors contend that the state is more and more giving into the demands of global capital

? ? ? ? ? ? ? ? ? Vogel has a completely different viewpoint, perhaps because he is dealing with something more specific than private authority in general. Regardless, he sees the “web of soft law” or global private regulation, as something that corporations entered into rather reluctantly, with no intent of becoming an authority. Instead, companies normally adopt CSR practices as a defensive tactic; to avoid consumer boycotts and media scrutiny, or because they believe it is good business, and very occasionally, because the CEO truly believes the company can and should make a difference. In essence, Biersteker and Hall’s concept of authority may not be of much use to the study of CSR; after all, authority cannot truly be authority if it is not on purpose. Failing this argument, we may reinforce our earlier point by asserting that if this authority is to be based on consent, then it can only be gained assuredly by including the public.

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? ? ? ? ? ? ? ? ? In Development Issues in Global Governance: Public Private Partnerships and Market Multilateralism, Bull and McNeill claim that states and private actors are increasingly enmeshed in a new form of multilateralism the authors call market multilateralism. Like Vogel, and Lipschutz and Fogel, these authors contend that there are emerging “generalized principles of conduct” (Bull; McNeill, 4) in global private regulation, but they focus more on global development institutions and public-private partnerships (PPP’s). The focus on PPP’s suits our purposes perfectly, especially if the evidence shows how and why PPP’s are effective.

? ? ? ? ? ? ? ? ? We must then examine the effects of PPP’s in the health sector, child labour, cocoa, tobacco, and software. In the end we discover that even with the inclusion of the public sector in what essentially amounts to large CSR projects, there are still challenges. Therefore, along with the inclusion of all stakeholders; especially the public sector in all CSR projects, a fundamental change in business culture that makes companies see CSR as an everyday and natural corporate activity is needed to produce clear, successful, and measurable results.

? ? ? ? ? ? ? ? ? PPP’s in health have been quite successful in improving access to drugs, vaccines and health care related technology. Neither the state nor the industry alone was ever able to make any significant gains here, and this is why these partnerships, and their successes, are so significant. Numerous multilateral organizations are now involved. Also important here, especially in relation to our discussion of authority, is the authors’ observation that PPP’s in health “cannot work without continued commitment by states” (Bull; McNeill, 91). The authors also hope, as they do throughout the book actually, that a few instances of non-market principled behaviour by corporations will somehow train corporations to do this more often. This is hoping for a bit much.

? ? ? ? ? ? ? ? ? To combat child labour, specifically in cocoa and tobacco, the International Labour Organization (ILO), a United Nations agency, “has entered into several non-traditional partnerships with transnational corporations and business associations” (Bull; McNeill, 99). To get around its own regulations which prevented it from working directly with companies, it established the International Cocoa Initiative (ICI) and Eliminate Child Labour in Tobacco (ECLT). Both of these organizations have formed extensive partnerships that include unions, NGO’s, governments, and various trans-national corporations. Not coincidentally, both have been extremely successful.

? ? ? ? ? ? ? ? ? However, in the case of the United Nations Educational, Scientific, and Cultural (UNESCO) organization’s partnership with Microsoft, UNESCO essentially lost control of the situation. Microsoft began doing projects on its own, and “the role of UNESCO was relatively unclear” (Bull; McNeill, 129). This partnership also caused damage to UNESCO’s relationship with supporters of Free Open Source Software (FOSS). It appears that in this case Microsoft used UNESCO’s legitimacy as a cover for its own CSR operations.

? ? ? ? ? ? ? ? ? What we should see is that the chances of success are higher when as many stakeholders as possible are involved, but also that this alone is not enough to control corporations in doing what they are designed to do above all else – make profit. The government must always be involved in CSR initiatives, and more than that, it must insist that corporations behave as corporate citizens; that virtuous behaviour is part of their very existence, and not a side-project. A trained dog running free can be good, but better to have it both trained and on a leash.

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? ? ? ? ? ? ? ? ? Our solutions - 1) that the government in some form always be involved in CSR projects, and 2) that states make corporations treat CSR as a natural everyday corporate activity - rely on the state asserting its power and taking action to fundamentally alter business culture. Is this even more farfetched than hoping, as Bull and McNeill do, that incrementally, virtuous partnerships and their short-term, non-profit aspects will have a softening effect on business practices? Not really. The latter solution relies on hope, and ours relies on action. As for how, exactly, the state can play a part in forcing a change in corporate culture, this is something we should seriously explore further.

? ? ? ? ? ? ? ? ? There is certainly a market for virtue, but as much of the evidence suggests, it will not produce the change in corporate practice that Vogel hopes for without action by the state. And certainly, the idea that corporations should take a more active role in effecting public policy is a bit strange, especially if we are at all concerned with how much power they already have in lobbying government to enact policies that only benefit themselves. Moreover, to pontificate about why CSR works better in some sectors, ie: child labour and health and safety standards, and does poorly in others, ie: freedom of association, and human rights abuses in extractive industries, is a waste if we know that in any sector government involvement is not only more likely to produce better results, but is ultimately more democratic and accountable than any company going on its own. By discussing The Market for Virtue in the context of the three other works examined here, we can at least be sure that we are not exactly sure what works and why – so it is best to at least have some control.

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Bibliography
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Bull, Benedicte; McNeill, Desmond. Development Issues in Global Governance: Public Private Partnerships and Market Multilateralism. London and New York: Routledge, 2007.

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Hall, Rodney Bruce; Biersteker, Thomas J. “Private authority as global governance”. Hall, Rodney Bruce; Biersteker, Thomas J. (eds) The Emergence of Private Authority in Global Governance. Cambridge: Cambridge University Press, 2002.

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Lipschutz, Ronnie; Fogel, Kathleen. “’Regulation for the rest of us?’ Global civil society and the privatization of transnational regulation”. Hall, Rodney Bruce; Biersteker, Thomas J. (eds) The Emergence of Private Authority in Global Governance. Cambridge: Cambridge University Press, 2002.

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Vogel, David. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington, D.C: Brookings Institution Press, 2005.

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