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Corporate Social Responsibility

In January 2005 the Economist magazine published a supplement on Corporate Social Responsibility (CSR). This gave a classic economists´ view, as indicated by the following quotes (amplified elsewhere) and indeed the very title of the review - The Good Company: a sceptical look at corporate social responsibility.

A novel idea was the four-way classification of CSR activities according to their effects on profits and welfare, and characterising the quadrants as below.

  Raises social welfare Reduces social welfare
Raises profits “Good management” “Pernicious CSR”
Reduces profits “Borrowed virtue” “Delusional CSR”

Examples of each quadrant were suggested by considering various measures. So you might have:

  • Good management (as when an oil company invests profitably in alternative fuels, anticipating both shifts in consumer demand and forthcoming taxes on carbon);
  • Borrowed virtue (as when a company creates private wilderness reserves at shareholders´expense);
  • Pernicious CSR (as when a company blocks competition in the name of specious environmental goals);
  • Delusional CSR (as when a company increases emissions of greenhouse gases in order to conserve raw materials that are not in diminishing supply).

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