The Opportunities and Challenges of Legislating Corporate Social Responsibility

Legislating Social Good
Jul 10, 2015 11:05 AM ET

Recent studies have shown that many companies are giving more generously to social causes than ever before. Some, like Unilever, Coca-Cola, GSK, and others, have begun to champion the notion that social and financial profit can be achieved simultaneously. But even the most progressive companies often sideline social investment and corporate social responsibility, using them more to increase a company’s brand image and awareness than to generate real social return.

In a survey of 26 multinational extractive companies, all but two said their company’s success depended on society, but most struggled to find ways to create a linkage between society and their business. The two biggest obstacles were corporate structure and the challenge of quantifying opportunity and cost—essentially bureaucracy.

Yet, even as social investment has risen, the amount most companies invest in social impact is well below one percent of net profit. Some governments have wearied of corporations’ inability to operationalize their commitment to meaningful social investment. Ghana, South Africa, and India—three of the world’s fastest growing markets—have legislated social mandates that force corporations to incorporate a minimum social impact contribution into their bottom lines. While CSR and local content laws hold promise of being able to deliver social value, they also come with drawbacks.

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