While recognition for the value that CSR and ESG contribute to business and community has increasingly grown over the last few years, the theory behind this work dates back much earlier than many people realize.
Today’s CSR programs have their roots in wealth creation, entrepreneurship, values-aligned investing, and personal philanthropy. In the 18th century, faith-based organizations refused to invest in industries, like tobacco and liquor production, the slave trade, and war-related activities, that did not align with their values. In the 19th century, wealthy businessman and philanthropist Andrew Carnegie challenged wealthy people to support social causes, following his belief in the Gospel of Wealth and John D. Rockefeller, taking inspiration from Carnegie, followed suit in donating more than half a billion dollars.
In 1914, Frederick Goff, a well-known banker in Cleveland, founded the Cleveland Foundation, a trustee of the Cleveland Trust Company. Its purpose was to give power to the community by accepting gifts from multiple donors rather than one fortune, who could collectively assess needs and respond to the community. This was the first community foundation.
During this time and into WWI, a rise of “community chests” was established (the precursor for the United Way) as another means to pool resources and centralize solicitation of the wealthy. It was in the 20’s, that payroll deduction for charitable contributions into “community chests” through the workplace began. However, it wasn’t entirely accepted as a traditional means of giving until WWII.
In 1928, the Pioneer Fund was established as one of the first mutual funds to deploy socially responsible investing (SRI) criteria, which included avoiding companies in the alcohol, tobacco, and gaming industries.
It wasn’t until after 1935, however, that businesses, and not their owners or shareholders, could support charities.
Howard Bowen, an American economist and Grinnell College president, is often cited as the “father of CSR.” He connected the responsibility of corporations to society and published a book in 1953, which advocated for business ethics and responsiveness to societal stakeholders called Social Responsibilities of the Businessman.
CSR truly began to take hold in the U.S. in the 1970s, when the concept of the “social contract” between business and society was declared by the Committee for Economic Development in 1971. The social contract is based on the idea that business functions because of public “consent,” therefore business has an obligation to constructively serve the needs of society. This is often referred to today as “license to operate” – that is to contribute more to society than solely their products for sale.
The social contract outlined three responsibilities, and they’re still applicable today:
Also in 1971, the Pax Fund (in response to the Vietnam War) and First Spectrum Fund were established using social and financial criteria in the investment process, basing investment decisions on a company’s social impact and business ethics.
In 1976, professor Sandra L. Holmes conducted a survey on CSR to find how decisions on which causes to support were made. Her results, from the Executive perceptions of corporate social responsibility, can boil down to:
Profession Archie B. Carroll summarized the above in 1979 in A Three-Dimensional Conceptual Model of Corporate Performance, which created a model to make CSR less nebulous. He cited Holmes’ survey that, “That these disparate factors should show up in a response to a question of this kind suggests clearly that business executives do not have a consensus on what social issues should be addressed.”
Using The Evolution of the Corporate Social Performance Model, which debuted in 1985, Carroll’s definition of CSR was understood as a 3-pronged approach:
This approach brought together social responsiveness and business ethics into one field of study and performance.
In the early 1990s, professor Donna J. Wood published Corporate Social Performance Revisited. This paper built on the two models previously mentioned and added an important facet: program outcomes and impacts. Aside from perhaps an early version of the impact measurement systems we know today, Wood also provided a model for assessing CSR at the institutional, organizational, and individual levels.
The very early adopters of CSR were companies such as Johnson & Johnson, whose founder, Robert Wood Johnson, established their credo in 1943, which requires that the needs of those they serve be put first. The Hershey Company founder, Milton Hershey built more than just a company in Hershey. He built a town and a community with facilities, civic centers, and cultural institutions that continue to grow today.
These initiatives were in the first half of the 20th century, and their founders understood that their stakeholders went beyond the board room and that when their customers and communities were healthy and vibrant, their companies would be as well.
Many of the companies you hear about today developed their modern strategies in the 1980 – 1990s and began to communicate their contributions, fueled in part by President George HW Bush’s call for thousand points of light.
As the 21st century progresses, the CSR field continues to evolve. In 2005, Environmental, Social & Governance (ESG) was first coined, and a few years later, “Sustainability” became a frequently used term in the field. The dot-com crash of the early 2000s and the financial crisis of 2008 “brought discussion on the social responsibility of business into the zeitgeist,” according to McKinsey.
In the mid-2010s, the global conversation around CSR grew with the introduction of the Enactment of Companies Act in India in 2013, mandating CSR for companies doing business in India. This was followed in 2015 by the signing of the Paris Climate Agreement and the creation of the United Nations Sustainable Development Goals (SDGs) further emphasized the importance of sustainability and climate action.
Then, in 2019, the Business Roundtable released the Statement on the Purpose of a Corporation, committing to:
The last several years have also brought the conversation of corporate purpose to the forefront. Corporate leaders are tasked with helping their companies to define if they are a corporation driven by competence-based purpose (based on the function of their product or service), culture-based purposes (based on the culture of their company or the way their business is run), or cause-based purpose (based on the social good their organization delivers).
Alongside conversations around purpose, stakeholder capitalism, “a popular management theory in the 1950s and ‘60s that focused on the needs of all constituents, not just shareholders,” has become an increasingly discussed topic amongst business leaders, including the Davos Manifesto 2020.
As stakeholder capitalism conversations continue, some companies are even beginning to enshrine their commitments to environmental and social impact through B Corp Certification and Public Benefit Corporation status. In 2021, Veeva Systems, a publicly traded tech company, became the first public company to convert to a public benefit corporation.
In 2020, the CSR field was confronted with the “triple threat” of an economic crisis, the COVID-19 pandemic, and the racial justice movement. for those working at the intersection of business and community, this time was wrought with continual change and transformation.
Currently, the driving theme in corporate responsibility is interconnectivity – between business and consumers, corporations and employees, employees and communities, racial justice and environmental justice, climate change and the economy, and more.
It is the connection of each movement to all the others. The work can no longer be siloed in one department. It is, by definition, connected and integrated throughout the business and affects a broad audience of stakeholders.
As we enter 2024, the questions on the mind for many CSR and ESG practitioners surround how they will be impacted by the Supreme Court’s ruling on Affirmative Action and what upcoming regulations from CA’s Climate Accountability Package to the SEC to the EU’s CSRD legislation mean for their company.
As new professionals join the field every day, it’s important to understand how this work began, how it has evolved, and the trends shaping its future.
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