CSR – The crucial omission!

9 Nov , 2012 Blog,Food for Thought,Macro Economics

With the rise of CSR and the ever increasing importance of providing sustainable business, we look to the multinationals like Innocent and Starbucks to lead the way as role models. Many of the websites have large gaudy tabs on their websites highlighting everything that they do to make the world a better place for coffee farmers, Asian factory workers and the environment. What I want to know is where responsible tax payments fit into it all and how they’re going to help out the people in the much closer environment.

In this article, I am in no way suggesting that the social and environmental factors are in any way less important, but I want to highlight that CSR should be a triangle of aspects, not just two. Paying tax and supporting the government of their resident company is imperative to sustainability, obviously economically, but also, indirectly, environmentally.

I think first we should actually define what CSR is. Of course definitions are subject to interpretation, but put simply, the Department for Business Innovation and Skills says; ‘Corporate Responsibility can be defined as how companies address the social, environmental and economic impacts of their operations and so help to meet our sustainable development goals…’. Now we know how they are making Felipe the Brazilian farmer happy with the price he is receiving for his coffee or Jamal the Indian component assembler having more hours off to spend with his family, and we know how many tons of CO2 the recycled packaging has saved, but what we dont know is the Economic impact of the ridiculously low levels of corporation tax that some leading companies end up paying to their countries of residence.

We’re all very good at looking out for those that are in desperate need of help, but what we are failing to do is actually cover our own backs and make sure we don’t fall into the same pile of quicksand that other people are struggling in. One of the first things that I learnt in a health and safety course at school was that if helping someone else puts you in significant danger, then don’t do it. Of course this is very cold hearted and robotic, and I know very few people would not be able to stand by and watch another struggle helplessly. There is however a lesson. The general interpretation of CSR is so focussed on how we can help others around us, we ignore ourselves and the danger that we are actually in ourselves. With such a globally recognised and important economy, we have a huge amount of power to help those in need, but in order to help others; we need to be anchored to the shore ourselves.

With reports coming out recently telling of Starbuck’s three year avoidance of tax in the UK, my point can be illustrated perfectly (along with Facebook, Google and Apple). They do a fantastic job and are more than happy to increase the welfare of hundreds of thousands of people around the world, from responsible sourcing of resources to ethical employment, but what they fail to realise is the impact of withholding all this money from the government. It is almost as if CSR to them is half-hearted belief and more of a marketing campaign than a genuine care for people around them. If responsibility was genuinely part of their corporate culture, the problem shouldn’t really arise. Of course it is sacrificing a precious 20-30% of their profits, but CSR has a cost, and in some way, that is the whole point of it. Ultimately (assuming a sensible allocation of resources) there is a very direct correlation between the degree of CSR and the costs arising from it. Companies are happy to spend far more money on raw materials, far more on fair labour, but are incredibly reluctant to complete the CSR triangle and support their appropriate government.

Who should be trying to solve the problem then? Wherever there are policies there will be loopholes, consequently wherever there are loopholes, there will always be clever accountants to guide companies through those loopholes, however tiny they are. The result is governments pressing for tighter and tighter policies, yet still people squeeze through the net (sadly that is what accountants are paid to do). Unfortunately these slippery companies are often the ones with the most to pay. I feel that the government should tighten up their policies, but that still remains a very single-loop solution, without addressing the fundamental problem of the corporate ethos of paying as little tax as possible. Why should it be any different from slashing your profits by paying more for your coffee beans or giving Jamal 20% more time to himself?

CSR is a triangle that is seen by the vast majority as only having two aspects and I think the third point, responsible tax payments, needs to be publicised more. What would be so bad about advertising this triangle approach? If it can be highlighted that high powered companies owe a vague form of ‘duty of care’ to the country they reside in (more specifically the economy), we will start to see an evolution of CSR to embrace the three aspects fully, ALL of which are essential for sustainability. There are quite rightly fair trade authorities and employee satisfaction awards, but I feel there should be recognition for the responsible payment of tax. This would make the brand far more attractive to all of us, the ones actually bearing the burden of the debt crisis.

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