Corporate Social Responsibility – the Corporate Hypocrisy

By | 03/08/2018

Two weeks ago, professors Magali Delmas (University of California, LA) and Tom Lyon (University of Michigan) published an opinion piece in The Conversation that is absolutely worth reading, especially in the context of my recent article on Environmental, Social and Corporate Governance (ESG) Reporting. In the article both business professors asses what they call “talking green while lobbying brown” – or in more general terms the hypocrisy of companies that on the one hand publicly establish their reputation for practising corporate social responsibility, while on the other hand lobbying to limit progressive environmental or social policies.

Typical examples include car manufacturers that engage in climate-friendly research or environmental projects in developing projects, while on the other hand actively blocking stricter regulations on engine size or emissions. As the two authors highlight such corporate lobbying especially affects the solution of urgent global problems such as climate change or the ocean plastic pollution crisis. They cite various cases from the chemical, oil & energy, and manufacturing industries as examples for running public social responsibility campaigns that improve a company’s reputation, while secretly implementing counteractive initiatives. Exxon serves as an illustrative example – as the company claims to be an active supporter of the Paris Agreement on Climate Change, while it at the same time is one of the most active opponents of national climate policies.

The core reason for such hypocritical behaviour – often called greenwashing – is basically a lack of transparency in corporate lobbying activities. It is hard to investigate the true extent and impact of lobbying when countries such as the US and most European countries lack proper registration systems for lobbyists and lobbying activities or for corporate positions on specific issues.

As a consequence, the authors demand to legally require “corporations to disclose more details about their political actions” – including a publication of a company’s lobbying position on relevant legislation or regulation, and a register for contacts with politicians and the direction of discussions. They also highlight the important role of investors and rating agencies in this context, who should better asses political transparency – with the rating agency Vigeo Eiris and the hedge fund Black Rock guiding the way.

The article is an excellent contribution to an important (and never-ending) discussion. It is especially important in the context of establishing and evaluating corporate reputation. In the perfect world, a company’s reputation would be an accurate reflection of all corporate activities and eventually how stakeholders evaluate them. Non-transparent lobbying creates an unfair bias in this reputation formation, often to the benefit of the more intransparent companies. A reputation that is based on pretty much complete information would, on the one hand, lead to fairer competition, but – to the benefit of companies – on the other hand, would also significantly decrease the risk for reputational crises, as reputation-damaging scandals or shit-storms are often the direct results of intransparent behavior of a company or its employees.

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