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Forbes: Leaders Face Tough Questions Over Environment And Social Justice

31 Aug 2021
A new AMR paper says that CSR practices might be more likely to become institutionalized if companies were allowed some leniency in how they adopted them.

Originally found at Forbes.com, by Roger Trapp.

Business leaders have to make many tricky decisions almost every day, and they must realize that they are not always going to get it right. But when it comes to committing to the environment, social goals or good governance, they could perhaps be forgiven for not expecting too much criticism. In the event, though, they are increasingly finding themselves under attack from pretty much all sides. For example, activists demand that they go beyond commitments to display real action against climate change, social injustice and the rest, while more traditional capitalists — for all the shifting of focus from shareholders to a wider stakeholder community exemplified by the restatement of the purpose of a corporation by the Business Roundtable two years ago — are concerned about executives being seen to be too political ....

The problem for business is that it could find itself caught between the two forces — those that believe it should not involve itself in political matters at all and those that will never accept that it has gone far enough. As a recent article in the Financial Times pointed out, “Many on the left doubt that capitalists can set their own house in order and suspect that they are embracing voluntary tweaks to their business models to avoid harsher regulation or taxes.” And indeed allegations of “greenwashing” appear to be increasing. Only last week, shares in German asset manager DWS fell sharply following reports that US and German authorities were investigating claims that it misled clients about its sustainable investing efforts.

Such developments would appear to suggest that regulators should take a tougher approach towards organizations that are claiming to be committed to ESG goals and demand greater transparency. However, a paper just published in the Academy of Management Review proposes a different approach. It says that CSR practices might be more likely to become institutionalised if companies were at first allowed some leniency in how they adopted them. Having taken what the authors term “the bait”, companies might then switch from being “ceremonial adopters” to become “substantive adopters” ready to accept transparency.


Continue reading the original article at Forbes.com.

Read the original research in Academy of Management Review.

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