The hazards of performative CSR action

Brands have made a lot of noise about their social efforts. But too often, it's more flash than substance, says Impakt CEO Paul Klein.

PaulKleinEven in the months before the pandemic, companies increasingly started to prioritize CSR efforts. Social unrest was on the rise, climate change was cresting in the public consciousness, and the public was increasingly demanding corporations do their part in helping solve to the world’s biggest problems.

In August 2019, the Business Roundtable – a group of 200 of the most powerful CEOs in the United States – declared that corporations should work toward the benefit of not just shareholders (a position it had held for more than two decades), but for all stakeholders, including customers, employees, suppliers and communities. This was followed by a January 2020 letter from Larry Fink, CEO of Blackrock – the world’s largest asset manager – that said it would redirect its clients’ money toward sustainable companies. There was much ado about the role business could play in social change in the corporate world.

Unfortunately, despite all of that noise, “the degree to which corporations are contributing to solving social problems is just not enough,” says Paul Klein, CEO of Impakt, a B Corp founded in 2001 to help corporations and other organizations tackle such problems. Instead of working toward meaningful solutions, corporations have settled into a comfortable new tactic: they’ve “become really good at talking about what they do, but not actually doing enough,” he tells strategy.

The new trend is one focus of Klein’s book, Change for Good, released this week. In it, he lays out the flaws in the approach – which he calls “CSR light” – and outlines the business case for corporations to step up as leaders in the push toward social change. According to him, one of the biggest issues undermining CSR efforts is that corporations too often don’t invite those who are experiencing a given social problem to the table in order to work out potential solutions.

“More than ever, if companies are interested in getting real business value out of supporting social change, it has to be more than performative,” says Klein. “It has to be a real commitment to making change, which really involves people with lived experience, and it should work backward from their experiences – really working from their point of view toward their solutions. The companies that do this are rising above ‘CSR light’ and genuinely contributing in a way that’s authentic.”

That problem has a number of possible solutions, but “employment of vulnerable people is perhaps the most important thing that companies can do in terms of directly creating social change,” he adds.

“There’s a lot of rhetoric around DEI and there’s a lot more that can be done in terms of employing people from vulnerable places,” Klein says. “Companies that do that contribute to all kinds of things: improved health, improved outcomes for kids, and so on.”

Another issue is a mistaken assessment of risk. According to Klein, “one of the reasons companies don’t do enough when it comes to solving social problems is that they think there’s a risk associated with doing so, even though there’s also a risk to not doing anything. That’s what has them stuck in this CSR light space.”

That’s a trap, however.

“People are smart, now, and they’re looking really carefully at what companies are doing,” explains Klein. “So what’s the downside, now? Is there even a downside to taking action anymore? Companies take risks all the time – by running a new advertising campaign which may or may not work, launching a new product that might or might not take off. There’s way more potential for brands and companies to do more in this space and actually benefit from it.”

This is true even for small brands. As one example, he points to Cheekbone Beauty, which has become a leader in driving indigenous representation in the beauty space. According to Klein, such companies stand as strong examples of how you don’t have to sacrifice profit for social progress.

“I also think there’s a great opportunity for companies that are Canadian to step up,” he notes. “Canada isn’t perfect, but the value set of being a Canadian and Canada’s role in the world is really important, and it’s distinct.”