By Paul Stokes

21 August, 2005 

It is hard to move in Edinburgh at this time of year without some corporate acting in a manner that can only be described as downright socially responsible. Hardly a ballet shoe is laced, bow put to string, filthy joke told or bum placed on seat without the generous financial assistance of one of the capital's capitalists.

The Bank of Scotland is subsidising Swan Lake, while the Royal is funding cut-price tickets for hordes of teenage lovers of opera and theatre. Standard Life is putting its money into Nuts CocoNuts, something which will probably not surprise its policyholders.

A quick peek at the finances of the International Festival shows just how significant the support of your average socially responsible corporate has become. Sponsorship and donations, most of which came from companies, last year provided it with ?1.73m in income, roughly the same as ticket sales.

So, with all this unavoidable evidence of corporate philanthropy right on its doorstep, it seems entirely appropriate that the Scottish Executive should this week urge business to pull its finger out, and start making more of a positive contribution to the life of the nation.

Allan Wilson, the deputy enterprise minister, announced the creation of a new Professorship of Corporate Social Responsibility to "enable" Scottish companies to behave in a more responsible manner. The chair will be indirectly funded by the Executive to the tune of around ?200,000 over the next couple of years. Pretty much all of it, one way or another, comes from us.

According to Wilson, the Executive is keen to promote "corporate social responsibility", as he refers to it. This does not sound too controversial. After all, no one is going to argue for the promotion of corporate social irresponsibility. However, in expressing his fondness for CSR, Wilson reveals some attitudes towards corporates that are at best old-fashioned and at worst pretty irresponsible themselves.

Wilson says the Executive is "committed to encouraging business to contribute positively to society", which seems to imply that business is not very good at doing just that without the encouraging hand of government. Displaying a gift for the backhanded compliment, he also says that "many successful, modern and vibrant Scottish companies are already behaving in a socially responsible way", which suggests that many are not.

The first problem with promoting CSR is that no one has much of a clue about what it is. Wilson says it is more than simply "giving something back". So much for all the Festival support. "It is a set of standards of behaviour to which an organisation subscribes, to make its impact on society both positive and productive."

But how is that different from normal business practice? The simple fact of the matter is that any business whose impact on society is both negative and unproductive will go bust. Business exists to make a profit. To do that it must make a positive contribution to society - that is, supply people with goods or services they demand - and it must do it in a way which generates wealth, which is productive.

Asked to provide further enlightenment, his office suggested the catch-all "it is essentially about how business does business". Examples of CSR in practice included ensuring equal opportunities and first-class training for staff, and not wasting energy. Again, the question has to be asked: how is that different from normal business practice? Companies that discriminate, companies that do not train their staff, companies that waste energy, and companies that lie and cheat are not generally rewarded by the market, or not in the long-term, anyway.

In one sense, the rapidly growing CSR industry is a shining example of murky capitalism in action. It has done exactly what it accuses bad old business of normally doing: it has created a new product that was not needed and convinced the consumer, in this case the chief executives of our leading companies, that they cannot live without spending vast sums on it, or more to the point, vast sums demonstrating that they are doing it. Many large quoted companies today have a highly paid director responsible for CSR.

To an extent the chief execs are right. For example, no company these days can afford to be seen as environmentally unaware. Yet the lack of challenge to the underlying message of the CSR industry by the corporate sector is extremely shortsighted. At its heart, CSR is fundamentally anti-business. It professes to have the interests of business at heart but it, wittingly or unwittingly, undermines them by reinforcing negative stereotypes of what capitalism is about. At its most extreme it seeks to replace the profit motive and the interests of shareholders as the driving forces in business.

Somewhat ironically, one of the most strident defences of the straightforward benefits of no-nonsense profitable capitalism, which is very different to profit-at-any-cost capitalism, is available in the glossy and no doubt expensive CSR report of the Royal Bank. Instead of opening with the normal tree-hugging platitudes it instead trumpets the fact that the bank's success enables it to pay ?3bn to shareholders, or future and existing pensioners as they should be known, ?4.5bn to employers, ?4.9bn to suppliers, and ?2bn in taxes to governments around the world. Elsewhere we read that the Royal puts some ?46m a year back into the community.

So that's ?14bn pumped into society from normal operations, and under ?50m from the touchy-feely stuff. Perhaps Wilson was more right than he thought when he said businesses' contribution to society should be more than "just" putting a little back.

At the same time it's worth remembering that the Royal has a legal duty to its shareholders, which means that ?46m can only be spent if it is intended to enrich those same shareholders. There are plenty of ways in which it might. Support for the arts, local schools, whatever, bolsters the image of the bank in the eyes of customers, staff and potential employees. A cynic would say it was just another form of advertising.

The Royal's motives for supporting the Festival and providing bank accounts, like all businesses' motives for doing anything, may not be particularly high ones and could be deemed insincere. So what? The core aim of capitalism is not to enrich people's lives but the wallets of shareholders. The only real responsibility a company has is to its owners.

It just so happens that the pursuit of those ignoble aims leads to behaviour that is, generally, industrious and responsible, and sometimes heroic. Enormous risks are taken with no guarantee of success, and a high chance of failure. Along the way, the lives of many consumers, employees and devotees of the filthy joke are enriched. If that is not positive and productive, then what is?