Host Christian Pearson and CSR proponent Ben Lewis take a deeper look at a hot topic in the business world: Corporate Social Responsibility. Ben shares key findings from his archival research on how rankings affect the way firms approach CSR. Later, they discuss the controversy surrounding the blurring lines between corporations and government, and examine the issue of “greenwashing” as a potential problem for small businesses in Cambodia.
Inside the Cambodia Project Episode 11: The Double-Edged Sword of CSR
with Dr. Ben Lewis
[00:00:00.410] – Christian Pearson
Hello, I’m Christian, and you’re listening to inside the Cambodia Project, an educational podcast where we discuss cutting edge research on sustainable business in an emerging market. Last episode, I talked with Ellen Ohms, an ex expat from Cambodia who lived there for several years. While she was there, she served the people as a missionary. And so in our podcast, she gave us a lot of fascinating insights into how the religious topography influences individuals and communities in Cambodia. In this episode, we’re talking to someone whose parents served missions in Cambodia, and so I hope he can extend the conversation of religion in Cambodia. Some. Mostly, though, we’re having him on our podcast to discuss corporate social responsibility, a topic that he is, quite frankly, an expert at. Dr. Ben Lewis is an associate professor of strategy in the department of Management at the Brigham Young University’s Marriott School of Business. Ben’s research explores how firms strategically manage their reputation, particularly within the domains of corporate, social, and environmental responsibility. Recently, he has focused his efforts on understanding how corporations respond to ratings and rankings. His work has been published in leading management journals, including administrative Science Quarterly and the Strategic Management journal.
[00:01:30.150] – Christian Pearson
Ben received his phd in management from the Johnson College of Business at Cornell University in 2013 and a master’s and bachelor’s in accounting and economics from Brigham Young University in 2008. Prior to pursuing his doctoral studies, he was involved in international development work in Kenya and Mozambique. Many of his research interests have been shaped by these experiences and drive his efforts to understand how businesses can be used as a force for good in society. Thank you so much for joining us today, Ben. It’s so great to have you on the podcast. I can’t wait to learn more about you about corporate social responsibility. Should be good.
[00:02:10.650] – Ben Lewis
Ready for it.
[00:02:11.660] – Christian Pearson
Okay, sweet. I love kicking off the podcast with a quote, just a little bit of brain food for us. And today’s quote comes to us from Henry Ford. I’m sure you know who that is. It’s a one liner, but it’s a good one. He says a business that makes nothing but money is a poor business. So that’s the whole quote. But I think there’s a lot in there to unpack. What do you think Henry Ford was trying to teach?
[00:02:37.410] – Ben Lewis
Oh, this is interesting. I think he’s speaking about know in many business classes, including some that I teach, we talk a lot about profitability, and I think sometimes the message comes across that the only purpose of a business is to be profitable. I actually disagree with that. Profitability is important for the long term sustainability of a business, but to me it’s a means to a bigger end. Companies that have a broader purpose, if they’re actually fulfilling that purpose, well, they will be profitable. But companies, in my opinion, that set out to only make money, they probably can make money, but I think they’ll fail in the long run because they don’t have a broader, higher purpose.
[00:03:24.490] – Christian Pearson
Interesting. So if the only goal is to make money, that’s not sustainable, well, there’s.
[00:03:30.300] – Ben Lewis
Definitely companies that have done that. When I think about sustainable, I think in long term sustainability over decades, things like that, I think eventually those types of corporations, people will leave. They don’t find the meaning and purpose in what they’re doing. And we’re talking about long term sustainable corporations and companies.
[00:03:51.420] – Christian Pearson
Interesting. Yeah. So you would say it is possible then for a business to make tons of money, maybe. But also be poor in parentheses. Yeah.
[00:04:01.230] – Ben Lewis
Poor in purpose, I think. Yeah. Poor in impact and what they’re actually doing. Yeah.
[00:04:05.810] – Christian Pearson
Interesting.
[00:04:06.620] – Ben Lewis
I would make the founders wealthy perhaps, and even some employees. But will those employees stick around?
[00:04:13.540] – Christian Pearson
Probably not, for sure. It’s a short term cash grab at.
[00:04:17.920] – Ben Lewis
That point, perhaps, yeah.
[00:04:19.540] – Christian Pearson
Cool. Well, thanks for just humoring me there with that quote. I thought it was really interesting. Before we dive too deep into questions about your research, I do want to hear just a little bit about your connection with Cambodia. What is the connection there?
[00:04:34.550] – Ben Lewis
Yeah, I wish I had a stronger connection. I mean, I feel like I do in some ways. My parents were called to be the mission presence in Cambodia from 2018 to 2021 for the Church of Jesus Christ Latter day Saints. And it was a fascinating time. They had a wonderful time there. My wife and I were planning to actually go visit. We had flights booked in April 2020.
[00:05:01.970] – Christian Pearson
Oh, no.
[00:05:02.640] – Ben Lewis
And then come, what was it, march pandemic hit. And all of a sudden, like, I don’t think we’re going. And then within a few more days, it’s like, yeah, we’re not going at all. And then things opened up a little bit, but we were never able to, before they came home, we were never able to secure a visa because it was very costly. Anyway, I don’t want to get into the details there, but, yeah, it just didn’t make sense to go and got you by the time they ended up coming back. So I have not made it there. But having spoken with my parents many times while they were serving, got a sense of the culture and what it was like, and they had an amazing experience for sure.
[00:05:43.040] – Christian Pearson
That is so neat. I hope you’ve been able to. Maybe you’re living a little vicariously through your parents that’s cool. Well, to start, I guess, with the meat and potatoes of today’s episode, we’re talking about CSR and ESG, and those are two amazing acronyms, but a lot of us don’t know what they actually mean. So if you could start by defining them, maybe, and tell us how are they different? Because I know they’re pretty similar.
[00:06:10.300] – Ben Lewis
Yeah. So it is kind of interesting. From a marketing perspective, I feel like ESG, which stands for environmental, social governance, was really just a rebranding, in some sense, of CSR. This idea that companies should be socially responsible has existed for many decades. I think the earliest iterations work sort of became interesting from an academic perspective. Go all the way back to the. When I was interested in this topic, one of the reasons why I chose to pursue a PhD in management and strategy was because this is where a lot of that research was taking place. Coming from an accounting background, which is what I studied as an undergraduate master’s student here. But I had this broad interest, as you mentioned in my bio, I had spent some time doing development work in Africa and Kenya and Mozambique. And so I had this broad interest that business should be a force for good in society. And certainly this idea that companies should be socially responsible is something that was really interested in. So that’s how I became interested in it. And like I said, the topic, this idea that companies have a social responsibility, has been debated for many, many decades.
[00:07:23.240] – Ben Lewis
But it’s something that I believe in. Now, from a research perspective, I try and take the scientist perspective. I don’t advocate for this necessarily. I try and understand, given the social pressures that companies face, how do companies think about this, particularly from a strategy perspective? But if you’re asking do I have a bias, would I hope that companies should be more socially environmentally responsible? The answer is absolutely yes, for sure.
[00:07:51.180] – Christian Pearson
Otherwise they’re poor, right? That’s what says. So what’s, I guess, is there a difference between, if we’re talking about corporate social responsibility or environmental social governance?
[00:08:02.020] – Ben Lewis
Yeah. Let me iterate or talk a little bit more about this. So the term ESG really became popularized, or it was coined in a United nations report, I believe, in 2004, 2005. And it was really for the investor, financial audience, and community whatnot. And they were trying to get that community to really take into this idea that companies should again, be socially environmentally responsible. But they sort of rebranded it as this environmental social governance criteria that investors and financial analysts would look at and things like that. So it’s interesting, because if you look at even some of my research I talk about ratings and rankings in relation to CSR, but in many aspects, you could replace that acronym with ESG, and it would mean the same exact thing.
[00:08:54.240] – Christian Pearson
Okay. So they are very similar. It sounds to me like ESG might just be more analytical, like an analytical approach. Yeah.
[00:09:01.480] – Ben Lewis
And I think it’s just kind of a rebranding for the investor community in some regard.
[00:09:06.380] – Christian Pearson
For sure. Well, I mean, that could be meaningful if it gets them involved. Right. So that’s good. How? Have you seen ESG and CSR affect business practices? Yeah.
[00:09:19.650] – Ben Lewis
So if you’ve been paying attention, like, if you read the Wall Street Journal, have you seen this in a lot?
[00:09:24.340] – Christian Pearson
I don’t read the Journal, no. Yeah.
[00:09:26.500] – Ben Lewis
I mean, just in general, for the audience who’s listening, perhaps if you’re paying attention to the business community, you’ll see that ESG has been a hot topic. It’s, from my perspective, sadly, become somewhat politicized. You’ll see politicians talking about it, and I think that’s to the detriment of what’s actually going on. That’s not to say that I agree with every single agenda or issue that’s being evaluated by these ESG ratings and rankings and things like that. But there’s been a lot of critique about what should we be measuring, what should we be evaluating. I think that’s what’s going on right now for a lot. For many years, even from 2005, when ESG was first coined, it sort of flew under the radar. I would tell people I study CSR or ESG ratings, and they wouldn’t even know what that meant. Right. But again, I would say probably around 2015 or 2016, things started taking off. And there’s been a number of articles, some of which I’ve been interviewed for in the Wall Street Journal recently, have talked about companies pulling back in terms of their investments in CSR and ESG, and that’s because there’s been quite a political backlash in terms of companies being criticized for being overly invested or taking too progressive stances on particular issues.
[00:10:47.330] – Christian Pearson
Interesting. Almost like this blurring of the gap between business and government. Right. Those two roles, it’s kind of a gray area when we talk about CSR and ESG. I could see why there might be some pushback there that’s so interesting. So I just want to bring you up to speed real quick. We’re doing research in Cambodia on this particular topic. Right. How can we use corporate social responsibility as a tool for small businesses there to influence their community for good? And we’re really interested in the social development goal number five, which is the gender equality. So we’re looking at, can we train these small businesses to hold interventions in their communities for mostly husbands and wives in order to reduce domestic abuse, which is a big issue in Cambodia. So that’s just kind of, I guess, an elevator pitch about the Cambodia project, which is what we’re working on. But in Cambodia, we’re looking at working with these small businesses. And it seems like from what I’ve seen, a lot of CSR and ESG research looks at the larger scale, big old corporate enterprises. Do you like, is that where most of the existing research is focused, or am I missing something?
[00:12:11.440] – Ben Lewis
It is, and that’s definitely where my expertise is, largely just from a data perspective, like when I’m trying to study these issues, it’s the large Fortune 500, SP 500 types of firms that have the resources and ability to think about other things, some profitability, and try and expand what they’re doing. And they’re also the ones in the limelight. So they also get a lot of pressure to face these issues. Whereas a startup or even a small business may not have the same level of scrutiny, and they probably don’t have the same level of resources to go and necessarily think about their Carbon footprint or how much they’re investing in the community and things like that. Sometimes they’re just focused on merely surviving.
[00:12:55.730] – Christian Pearson
Yeah. And that’s actually something we talk a lot about when you’re looking at a developing market like Cambodia. A lot of these businesses are in marketing. There’s differentiators and there’s survivors. A lot of these are survivors. They’re not even thinking about differentiating yet, but that’s a different topic. As far as large businesses, small businesses, would you say, if you give me, like, a number, what percentage of the existing research would you say is focused on the large enterprises versus small businesses?
[00:13:25.530] – Ben Lewis
The overwhelming majority. I mean, it’d be hard to say, but if I were just guessing off the cuff, I’d say 90% is focused on, or more is probably focused on the large corporations.
[00:13:36.940] – Christian Pearson
Well, you know what? That’s a good thing for us since we’re trying to be on the cutting edge of research. Hopefully we’re opening a new frontier.
[00:13:44.870] – Ben Lewis
Yeah, for sure. And I think that means there’s an ample opportunity to understand what’s going on at the sort of local, smaller scale level.
[00:13:52.430] – Christian Pearson
I really hope so. Since you are, it sounds like you’re pretty involved in the research on CSR and Wall street journals, not just your everyday Salt Lake Tribune. What are some of the hot topics in CSR right now.
[00:14:06.880] – Ben Lewis
So dei diversity, equity, inclusion has been a hot topic, which is an element under the social dimension, if you think about environmental, social governance. And to be honest, it’s that social dimension that’s been probably most contested and perhaps politicized. The environmental domain has really been focused on climate change and carbon footprint. And I think in terms of progress and understanding and agreeance on both political spectrums, there’s been a lot more progress there. The SEC, the Securities and Exchange Commission, which regulates these large public companies, are in the process of trying to get companies to disclose their carbon footprint and things like that. So that’s been a big issue. I think there’s been a lot of progress there, but there’s been a lot of backlash and discussion and contestation about these social issues and whether or not companies should even care about these or take stances on particular social issues and things like that. And for many years, they didn’t. In fact, it was sort of seen as not wise, not strategically wise for companies to get involved in social or political issues. And yet, because of these ratings that have emerged and expectations from companies, and I think a lot of it has dealt with social media as well, companies have almost been expected to not just invest, but take public stances on particular issues.
[00:15:39.880] – Ben Lewis
And I think that’s kind of what’s being debated right now.
[00:15:42.670] – Christian Pearson
Yeah. So where do you stand with all of this? I mean, tell me more about, I guess, the backlash. You mentioned earlier that some businesses recently are almost pulling back. You said they’re pulling back from the CSR. Is that affecting the research? Is research for CSR? Is that growing, or do you feel like it already kind of hit its prime? Is it shrinking?
[00:16:04.710] – Ben Lewis
Well, it’s definitely has increased over the last five years. Definitely. Like I said, I’ve been studying this topic for over a decade, but I felt like for at least the first five years or so, it was kind of under the radar. But it’s definitely been something that people have been interested in. Again, I think what it comes down to is, as a society, there’s different morals and different beliefs about what should be valued, and I think that’s what’s being debated. Eventually, over time, society comes to at least depends on what level of society you’re looking at, like a national, regional whatnot. But things become institutionalized or normalized, where things becomes normative, for example. Let me just give you an example. So one of the topics I’m studying is gender diversity. You talked about that at the sort of local level I’m looking at, at the board level for large corporations, in 1990, the most common type of board that existed for a public company was an all male board.
[00:17:10.160] – Christian Pearson
Yeah.
[00:17:10.750] – Ben Lewis
And I think under today’s morals and society, people would say that’s unacceptable. Right. Women need to have representation on boards as well. Now, does it need to be equal? I think some people believe yes, and that’s maybe where it’s headed in the long run. We’re not there as a society yet, but that’s something that’s being debated. And again, in 1990, it seems silly to say, like, why would that ever be the case? Well, that was the norm. That’s what was the most common type of board. But due to pressure, perhaps due to these ratings, one of the first ratings that came out on CSR, the rating agency, was known as KLD, and they came out in 1993. And one of the issues that they evaluated was board gender diversity. And they basically gave a negative rating to companies that had no women on their board. Well, what do we see from our research? We see that companies respond by starting to add women. Now, initially, what they did was they just added one. A token woman, perhaps. And you could disagree with that, but that was in some sense progress. And from our research, though, we show that it created this catalyst or this wave.
[00:18:18.580] – Ben Lewis
And a lot of the change that we’ve seen now, actually, the most common type of board that we’d see, at least if we’re looking at, like, a population like the S and P 500, is now three women on a board. And if you care about this issue, you would see that as progress. Maybe it’s not enough progress. But again, I think that’s why there’s this debate. It’s like, do we care about this? Do we not? And that’s just one particular issue. There’s all sorts of issues that are being debated right now in the social dimension, like lgbt, trans rights, all that kind of stuff.
[00:18:49.630] – Christian Pearson
Yeah, I can see how this would be a really. It’s not quite as simple as it looks to get involved, especially for a large business. Like you said, they have lots of people watching them to get involved in CSR because you’re entering this very fluid, I guess, these fluid set of expectations that change with the whims of society. Right. With whatever the big hot topic is of that year or that decade, so, too will have to change your corporate.
[00:19:16.890] – Ben Lewis
Yeah. And it was interesting because, again, like I said, for many, many decades, the strategic priority was that if just don’t get involved with political, contested type of stuff. Right. But with social media, you’d get companies and employees even that would say, hey, we need you to. What is our stance on this issue? And so it sort of became information that was disseminated and then companies in some sense felt pressure to take stances. Now, is that going to swing? Is the pendulum going to swing back? Perhaps. And I think that’s kind of what’s happening right now. Some companies are pulling back not necessarily in terms of what they’re doing, but in terms of how they’re portraying and talking about what they’re doing. I think they’re realizing that being too political or even taking stances on issues puts a target on their back and they’re trying to be more wise about what they talk about, for sure.
[00:20:09.860] – Christian Pearson
That’s super interesting. That’s definitely one issue you could find is being too vocal and over communicating. I think another issue, though, is, and the one that we’re worried about in Cambodia is this idea of maybe communicating for the sake of communicating. Right. And maybe not actually having that drive the deeper moral compass kind of underlying all of CSR. We’re kind of worried that firms in Cambodia, these smaller businesses, might agree to participate in our project so they can get in store signage and tools and resources for communicating that they care about the community. Right. But they might not actually internalize that and participate heavily in the actual process of making changes happen. We’re worried about a surface level intervention. Right. Do you have any advice on maybe how we can address that and help these small businesses really buy into our initiative and not just use it for signaling purposes? Yeah.
[00:21:17.450] – Ben Lewis
So it’s interesting. This is a big problem at the corporate large organizational level. It actually has a term. It’s called greenwashing. It’s more of a greenwashing came from this idea of whitewashing, which is let’s give the Persona that we’re doing something, but under the surface, it’s actually, we’re not doing anything of substance. Right. And they relabeled whitewashing, greenwashing for, like, the environmental domain. We’re going to look green. We’re going to say we’re doing green stuff, environmentally friendly stuff, but under the surface, they’re not really changing their core competencies and processes and things like that. I think the same challenges, though, exist at a small sort of local business level as well, particularly if you’re providing incentives and helping train companies to be more socially responsible in their communities. It could be that there are signaling benefits to doing so. But under the surface, maybe there’s not that authenticity that we might hope for or expect that would lead to sort of long term impacts and sustainability.
[00:22:24.370] – Christian Pearson
Yeah, I mean, we hope that we actually do want the benefits to be there. One crucial aspect of our research, we’re measuring revenue for these companies, and we’re hoping to see an increase in revenue as people in the community begin to trust these businesses more and see them as more of figures of influence. Right. So that’s definitely something we want, because as these businesses see more interactions with their community, as they become more successful, that provides more jobs and ultimately will help the community, we think. But we also don’t want that to be the only reason that they do it. Right. We want there to be some really sustainable change. I mean, it would be great if we could at once raise the economy of a community and also reduce the domestic violence, but we’re just not sure, is that possible?
[00:23:20.210] – Ben Lewis
I could talk about from a large corporate level, like when these pressures first came out in the 1990s, there were lots of companies that started, at least on the surface, making investments in CSR and things like that. But as the scrutiny increased as well, there would be ngos and other rating issues come out and say, oh, yeah, you say you’re green, you say your environments are socially responsible. But then they’d start to look at what they’re doing, and they would find out that they’re not actually doing what they’re doing. The bottom line is companies that were signaling that they were green or socially responsible, but weren’t actually in the long run, they tended to get punished and criticized and scrutinized by these other monitors, these stakeholders who actually cared about these issues and were watching. And I think the same thing could be said about a small business in the sense that they could perhaps benefit in the short run with increased revenues and things like that. But employees and customers, they quickly learn which types of companies they can trust. So, again, I think in terms of a long term impact, it would be for the company’s benefit to not just portray at a superficial level that they care about these issues, but really make the substantive changes that they need underneath to signal that they care about those issues.
[00:24:40.030] – Christian Pearson
Yeah, I think that’s so important to understand. It’s important for us to understand, but it’s also important they understand that. How do we go about communicating what you just said to these small businesses?
[00:24:52.710] – Ben Lewis
Oh, man, this is where I wish I had more expertise in consulting and even researching smaller businesses. I don’t know if I have a silver bullet in terms of do this and that will work, but I do think, being aware that there’s a tendency for companies to take the low hanging fruit, which is put a sign up, make this brochure, say that you’re doing all this stuff, not actually change again the underlying processes or even the mental models that if we’re talking about local sort of small businesses, it really comes down to the founder or owner of that business. Do they actually believe in those particular issues? Do they believe that it’s not just important for their business, but it’s an important moral issue that they actually support and believe in? If they don’t agree with that, then I think it’s going to be hard to get them to buy into it in the long run, especially. Maybe they benefit in the short run initially, but then customers figure out that they’re fake or it’s hypocritical whatnot, and then all of a sudden they see their revenues decline, and then they just say, oh, well, this was all for not essentially right.
[00:26:05.730] – Christian Pearson
You make a really good point there. I guess a follow up question. Even if you don’t know how we can communicate that, how can we measure, what are some of the best practices for measuring the true effect, the deeper effect of corporate social responsibility when we’re working with these small businesses?
[00:26:23.460] – Ben Lewis
What would you recommend? I’m an archival researcher, which means I look at data from the past. I go back into the history book, for sure, and things like that. And I think one of the best ways to signal authenticity is a history, a pattern of consistency. Right. And so when we’ve seen companies that you can say all you want, but if they actually do what they say they are doing, and they’ve done it for many, many years, that’s a really good signal of genuine authenticity, that they actually care about the issues, particularly when there’s pressures, if we’re looking at macroeconomic pressures, where, like the financial crisis in 2008, companies that continued to make investments in CSR, it was pretty apparent that they still cared about those issues enough to, even when the economy was kind of going down and there was headwinds that they were facing, they still cared about these issues enough to kind of continue to invest in them. To me, that’s the type of signal that you could say from a research perspective, this company still really cares about these issues. It’s not just we’re going to pull back because we can’t afford to right now.
[00:27:33.710] – Ben Lewis
This is important enough that we still need to invest in it, even if we’re going to take a cut in profitability or something.
[00:27:40.870] – Christian Pearson
Right. And that’s something that we’re definitely going to look at in the long term for our research is are they willing to sacrifice for this? Is this something that once the resources are gone and were gone, are they going to keep running these interventions? Are they going to keep promoting good in their communities? We hope that they will. And I think it’s going to have a lot to do with how we communicate this new idea of corporate social responsibility. It’s never really been done before in this particular market, and I think it also has a lot to do with what you were saying earlier about are they bought in? Like, do the business owners really believe in gender equality? Do they really believe that reducing domestic violence is an important issue that should be addressed even on the corporate level? So I think that’s super important that we not only communicate that at the beginning, but that we follow up and we measure throughout the whole intervention. Right?
[00:28:45.000] – Ben Lewis
Yeah.
[00:28:46.390] – Christian Pearson
This has been so great, Ben. It’s been awesome to talk to you. I do have one last question for you before we go. For a lot of us, corporate social responsibility kind of seems like almost an abstract concept, right? Just because not everyone works in an executive position in a business, not everyone has the kind of influence, the kind of influence where you can say, this is what we’re going to do, this is how we’re going to change this business. This is how we’re going to change the culture. Knowing that, what would you say to the common Joe, the everyday people, those of us who still want to get involved in social responsibility, regardless of if we’re affiliated with a business or not, what would you say to just the common people?
[00:29:35.400] – Ben Lewis
Oh, that’s a good question. I mean, the fact that this is an issue that’s being debated and discussed is good in the sense that there’s lots of companies that are now considering, what should our stances be? Should we take these investments? And so I think there’s never been a better time to, if you’re looking for a job for a company, you will find a company that cares about these issues. Now, it may take some time, but you can find a company who’s making investments in their community, who are taking the environment seriously, things like that. And that’s never been easier than it has in the last couple of decades. But let’s say, like, you care about, you know, the environment, you care about social issues, and, you know, you’re not looking for a job. Like, how can you still get involved? Yeah, I mean, I think there’s, there’s, I mean, there’s political debates that are going on right now. I think just simply becoming informed and just knowing what’s going on in society. And then I think getting involved in your community, seeing what companies are doing, getting involved in the nonprofit world and who’s having an impact in those local communities can be a way to get involved and sort of make a difference in that way as well.
[00:30:52.030] – Christian Pearson
I love that. Yeah, just getting involved, right? Being informed, these are all things I can do better personally. I know they’re just kind of best practices in general. If you want to make a difference, you can. You just got to put yourself out there, right? That’s something we really believe in on this podcast. And as a part of this project, we really believe in the power that people have to make a difference, the power that these small business owners will have to lift their communities, even as they hopefully are lifted by their communities. And so I’m so glad you brought that up. Thank you so much for coming on the podcast. And a quick reminder for all of our listeners out there that you have power to make a difference. You can make an influence as well. You can lift your community. And so, as always, days lift where you stand.