Is COVID-19 changing the face of corporate social responsibility?
Updated: Jun 25, 2020
The COVID-19 crisis has seen plenty of examples of companies being socially responsible, as well as many cases of flagrant irresponsibility. More than anything, though, it has shown how much corporate social responsibility relies on strong government.
It is at times of severe crisis and upheaval, like we have witnessed in relation to COVID-19, that company’s commitments to corporate social responsibility are really put to test. Even when times are good, companies can find many good reasons for focusing on the bottom line above broader stakeholder interests. But when things are going downhill fast, when stores and restaurants are shut, factories are closed, and production is virtually at a standstill, we can see to what extent companies are really serious about their sense of social purpose.
Only last year, nearly 200 CEOs signed a Corporate Roundtable statement declaring that the purpose of the corporation was not just to enrich shareholders and that profit maximisation should be supplanted with “a fundamental commitment to all of our stakeholders”. Some appear to have taken the message to heart during the current crisis. Take GM, whose CEO Mary Barra signed the Corporate Roundtable statement. They have switched parts factories to making ventilators and PPE, and suspended dividends to shareholders. This seems to be a good start in rebalancing their commitments to different stakeholders.
There are lots of other great examples of firms going the extra mile to look after their stakeholders’ interests – banks giving mortgage holidays to their customers, supermarkets dedicating shopping hours to the elderly and health service workers, beverage companies switching to producing hand sanitiser, food companies donating to food banks, and all kinds of companies enabling flexible working, offering full pay to workers and other means of supporting their workforce that go above and beyond what is required by law. Some commentators have gone so far as to say that the crisis has accelerated the shift to “stakeholder capitalism”.
On the other hand, we have seen plenty of examples of irresponsible business practice too. Amazon’s Jeff Bezos, another signatory of the Business Roundtable statement, for example, has been widely criticized on account of his company putting workers at risk with insufficient safety procedures in their warehouses – and then for firing workers that protested about it. There have also been numerous examples of companies charging excessively high prices for products in high demand during the lockdown, lobbying to keep their factories or stores open in opposition to local restrictions, and making swingeing cuts to their workforces, even while accepting government financial support.
Still, few companies could lay claim to getting their response 100% right – or even 100% wrong. As is so often the case, there are multiple stakeholders involved, each with their own claims on the company’s time, attention and resources. We tend to focus on benefits to stakeholders that are most visible – such as donations of money or products to good causes – but sometimes the most important are those that happen behind the scenes, where workers lives and livelihoods are either protected or put at risk. Consider the case of workers in the garment supply chain where there has been considerable variation in how brands have dealt with their hidden, offshore workforce of highly vulnerable workers. While some companies have honoured their pre-crisis orders, many others have either cancelled their orders, refused to pay-up for undelivered orders, or demanded deep discounts from suppliers – actions that shop floor workers usually bear the brunt of. So the frontstage story of corporate responsibility does not always match the backstage one.
The bigger issue here though is what all this says, if anything, about the role of business in society. Is anything changing during COVID-19? Can we expect it to going forward?
Such questions have been brought into focus by the movement to “build back better” and tackle deep-rooted problems around inequality and climate change. Just a few weeks ago, more than 200 leading UK businesses signed a letter calling on the government to deliver a COVID-19 recovery plan that “aligns with the UK's wider social, environmental and climate goals.” This includes demands that the government focuses funding on sustainable growth and aligns its financial support packages to climate goals. Globally, the World Economic Forum has launched "The Great Reset" calling for broad system change and a new social compact.
And in many ways, the big story here, both with the crisis and calls for a sustainable recovery plan, is how much of a role “big government” is seen as playing. It seems that, in contrast to the usual rhetoric around the need for companies to take on new responsibilities in neo-liberal economies, the state has not outlived its usefulness after all. It is governments, not large corporations, that we have all been looking to throughout this to safeguard citizens, protect the economy, and support business. Billions of public money have been funneled into the COVID-19 response, in developed and developing countries alike. And rather than individual and corporate taxpayers balking at the expenditure, there is clear indication that many are looking to government to continue in a similar vein as we move into recovery and the next crises of economic recession and climate emergency.
Companies, of course, still have a significant role to play in tackling COVID-19, just as they will in addressing recession and climate change. Most obviously in the case of COVID-19, firms are deeply involved in developing vaccines, producing PPE, protecting their customers and workers, and more. But the need for government to provide unity and direction, set the rules, enforce standards, and provide financial support for the major transformations to come is now crystal clear. For example, ensuring that pharmaceutical companies produce a vaccine that is freely and widely available to all will not so much rely on corporate largesse as political will from governments. The point is not that corporate social responsibility will disappear, but that the key role of governments in shaping its extent and effectiveness has become increasingly obvious.