Adam Smith, founder of CSR

Last week a Fortune 500 executive told me he was “personally interested in [company name] making a positive social impact.” After a pause he added “But, obviously, economists would caution that corporate social responsibility is financially imprudent.” Like this gentleman, many of us assume the great economic thinkers disapproved of corporate social responsibility (CSR).

In reality, most economic — and management — iconic minds considered societal good integral to business success. We’ve just somehow neglected that part of their message.

Let’s start with the father of economics, Adam Smith. It’s true that his second book, The Wealth of Nations, focuses on the role of self-interest in driving markets. Yet Smith’s first book, The Theory of Moral Sentiments, starts by stating that we are naturally interested in “the fortunes of others and render their happiness necessary” despite deriving no reward except “pleasure.” Even the father of economics recognized that people and, thus, markets, use both a rational calculation of self-interest and an instinctive desire to serve society. Indeed, Adam Smith could be considered the father of CSR.

Other luminaries reiterate Smith’s view of business as driven by both self-interest and social purpose. The inventor of management, Peter Drucker, certainly considered profit a necessity — as we all should. He also said, however, that it’s a “mistaken belief that the … profit motive of the businessman … is an explanation of his behavior” and concluded that “whether there is such a thing as a profit motive at all is highly doubtful.” Similarly, in their 1994 management best seller, Built to Last, Jerry Porras and Jim Collins urged us to unlearn the prevalent belief that enduring companies made profit their dominant goal. Their research showed that enduring companies did not. Today, Harvard Business School’s Michael Porter, the world’s most cited business strategist, advises companies to create economic value in a way that also creates social value.

To be fair, one brilliant economist disagreed with Smith, Drucker, Porras, Collins and Porter. In 1970, a Milton Friedman New York Times article famously stated that “the social responsibility of business is to increase its profits.” I’m not suggesting the business value of CSR is beyond debate. I’m saying that, unlike what many of us assume, many luminary economists favored CSR, even if the term didn’t exist during their era.

In summary, it’s time we stop blanket blaming the great economic thinkers for our hesitance in conducting corporate social responsibility.

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