CSR in the Early Days of Capitalism

If you think that CSR, not to mention its newest form – shared value, is a relatively a new phenomenon, think again. As Nancy Koehn, Harvard Business School professor and historian, explains in an interesting HBR video, we can find examples of corporate responsibility, especially with regards to companies’ social footprint, as early as the foundation era of capitalism.

Back then, industrialists like Josian Wedgwood and later Henry Heinz “thought that the kind of business they had and its role in society were much interconnected, and so what was doing well by society was very good for their business,” Koehn explains.

It might sound somewhat surprising to those who are used to think of this era mostly in terms of labor exploitation, sweatshops and low quality of life in general for the working class. But apparently this era provided not just examples of poor social practices, but also of ones that could get high CSR scores today. So does it mean we should actually look more at the past when we think about the future of CSR? Are there any valuable lessons to be learnt from the early days of capitalism?

Koehn is not the only one exploring the past. Actually, a closer look will show you that some of today’s most prominent examples of CSR have been taking a similar journey in the time tunnel. Take for example, Unilever, one of the leaders in the sustainable business world. Last February at the KPMG Global Summit I heard Paul Polman, Unilever’s CEO saying the following:

“We are not out there just to make money. We are out there to satisfy consumer needs and doing that well we will make money...We have to go back to the origins of these companies. When Lord Lever started with his toilet soap company that was Victorian Britain, where one of two children died in one year because of hygiene problems. That’s why he invented toilet soap. We’re selling toilet soap globally to cut down on infectious diseases. Still, six million people die. That’s why we’re in business.”

Another example is Marks & Spencer (M&S), which developed the groundbreaking Plan A. When Sir Stuart Rose created Plan A in 2007, it was a direct continuation of his efforts to re-emphasize the core values that had helped M&S succeed from its early days in the late 19^th century. Those values were value for money products, a welcoming store environment and a great customer service. One of the reasons behind Plan A was to reconnect M&S to its roots through sustainability, integrating it into every aspect of the business. You can find a reminder of this in Plan A’s progress reports – in the last one, Robert Swanell, the chairman of M&S, writes: “We do business in line with our values - Quality, Value, Service, Innovation and Trust - and recognise our responsibilities to customers, employees, partners, suppliers and local communities.”

The earlier examples Kohen provides of Josian Wedgewood and Henry Heinz are mainly about the way they excelled in taking care of their employees and communities, from providing housing and adequate food supply to workers to helping local communities to thrive like Pittsburgh in the case of Heinz. They did it, Kohen notes, out of their sense of responsibly and aspiration. Moreover, Kohen emphasizes that these practices paid off, noting that history teaches us that a company's "social footprint is very much related in a positive way to financial performance.”

While these historical examples are important, my feeling is that CSR was a marginal element in this era. Indeed some industrialists and entrepreneurs with vision and responsibility were more progressive when it came to their relationships with stakeholders like employees and communities, but the majority were far from it. All they were interested at was increasing their wealth and, as a result, workers had to fight hard to receive rights and be treated fairly.

The same goes for communities – there were for example some successful attempts to create company towns that would provide workers and families a good place to live, like Hershey for example. On the other hand, there are plenty of company towns, especially ones that were built by oil, meatpacking and textile companies that were more like “exploitationvilles,” as Hardy Green calls them in his book, “The Company Town: The Industrial Edens and Satanic Mills That Shaped the American Economy.” My guestimation is that for every Hershey you had about 10 exploitationvilles, not much different from the ratio today between companies that take CSR seriously and companies that don't.

Still, there are important lessons the business sector can learn from its early history. These are lessons about ideals and leadership that helped companies like Unilever, Heinz and M&S thrive. Nevertheless, I think the most important lesson from the past might be that these elements are probably not enough to create a sustainable economy – to scale up sustainability we need to make sure that the business case of CSR is very clear and it enjoys a large consensus as well as supportive policies. Otherwise, in 100 or 150 years historians might have similar discussion on the days of CSR in our time.

[Image credit: Chris M70, Flickr Creative Commons]

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.