With the rise of the role of private capital in development, debates arise about the possibility of CSR activities contributing effectively to development objectives.  Can multinationals and private capital really play a role in development without imposing their agendas on local communities?  Can companies investing locally contribute to the development goals of a nation, regional economic development ventures, or the international targets for development (i.e. MDGs)?  Are companies qualified to play a role in development at all?  Will civil society organizations that rely on the traditional official development assistance disbursements to operate become displaced in this new framework and will their expertise be lost?

In order to understand what role CSR activities can play in development, we must look at the different definitions of CSR itself.  On the one hand you have the argument that CSR is simply the latest fad that allows companies to justify their replacement of local governments.  This argument claims that when a company invests in the local community they are effectively replacing the government and creating a dependency on the company itself, perpetuating the cycle of dependency.  In this case, because the “donor” is from the private sector and not from traditional ODA programs proponents of this argument seem to have an inherent bias against the outcomes that are produced.  But consider this, does it matter whether the local government is replaced by a company or by DFID/CIDA/USAID?  Does the net effect on development change depending on the source of the investment?

On the other hand you have proponents of CSR activities who view them as a core aspect of business operations.  In this case, business operations from sourcing to production to distribution are analyzed and negative impacts resulting from those business operations are addressed.  CSR strategies are then developed to cope with the negative impacts that are produced from business operations.  This is a much more holistic approach to CSR activities, and also both more challenging and more focused for a company.  For example, the story of Interface Carpets – a company that changed the entire way it operates in order to be a better global citizen.  This inward looking focus that assumes responsibility for the externalities caused by a company’s operations can be effectively focused on social challenges as well as environmental challenges a company faces.

Can either of these interpretations of CSR coincide with or replace international development assistance?  In a few cases, CSR and development can dovetail.  In the majority of cases they will not.  Corporate philanthropy, on the other hand, may overlap with international development in quite a few areas as simply another source of funding.  For example, a mining operation building a school in a community in which it is operating is a good example of corporate philanthropy According to the second definition of CSR activities, this would not be considered CSR because primary education has nothing to with the business operations of the mine.  But these examples can be fairly nuanced – if a mine creates a technical institute for the community in which it operates, with the objective of educating a workforce for employment, this is required for their business operations and can dovetail with the development needs of the community.

In short, CSR should never replace international development assistance, and companies should not become the sole or primary actors in this arena.  Nonetheless, they do have a role to play and can contribute to the daunting task of assisting nations to climb up the development ladder.  Development is about a larger international framework, and assisting countries in their national objectives is not the primary role of a company or of private capital.  Companies can contribute to development objectives but should not want to take on responsibility for the entire official development assistance portfolio – that is not a company’s raison d’être.

What are your thoughts on the definition of CSR?  What is the role of the private sector in aid?  What is the role of corporate philanthropy?  We look forward to hearing your comments.