Corporate social responsibility, the feeling of responsibility towards the community, expressed by managing their business processes in such a way that they contribute to society (Baker, Unknown), is not only about making a profit. It is also about helping society. Thus, you would expect that corporate philanthropy, organizations donating money, goods or time to contribute to the welfare of others (Ehrlich, 2013), is a part of corporate social responsibility. But what if there is always an underlying motive, and corporate social responsibility really is just about making a profit, even when it comes to corporate philanthropy? The main goal of most organizations is to make a profit. Organizations can use corporate philanthropy to improve their image, by giving money to a good cause, using it as advertisement for themselves, or simply listen to the demands of pressure groups (What's wrong with Corporate Social Responsibility, 2006). Why else would they give away shareholders money, if they did not know they would benefit from it. So if corporate philanthropy can also be about making a profit, would it not be greenwashing? Greenwashing is described as a way to create a good reputation for a company or product, while this is in fact not true (Jurišová & Abdrabou, 2012). If a corporation gives money to a good cause, which they in fact use as advertisement, it could be seen as greenwashing. Organizations can pretend to be all about philanthropy, but in fact all they care about is reputation, advertisement and making a profit. So my question is, since corporate philanthropy in some situations can be seen as greenwashing, my research question is: is corporate philanthropy always a form of greenwashing?
Since there are no current theories on this subject I think it is an important one to answer. To get an answer to this question, first I will talk about greenwashing and philanthropy to define what they actually mean. Secondly I will describe two corporate theories: the instrumental theory and the integrative and normative theory. From the point of view of these different theories I will take a look at a case where philanthropy is possibly used as a way to redeem reputation and see if philanthropy is actually a form of greenwashing or not.
If we look at a definition of corporate philanthropy, namely: corporate philanthropy as an unconditional transfer of cash or other resources to an entity or a settlement; it is not an explicit exchange of value between two parties, but rather a transfer of wealth from one party to another (Godfrey, 2005). Godfrey speaks of philanthropy as an unconditional transfer. This is important because it has to be clear that philanthropy is a donation, not a transaction. Of course companies can gain things from philanthropy, such as a good reputation, or advertisement for their products, but this is a side effect of philanthropy.
Greenwashing is a lack of testability of the information disclosed by the company. It only creates the impression of good conduct, but it is not so. (Leighton, Roth-Arriaza & Zarsky, 2002). They also say that greenwashing has many forms, such as claims of improvements without quantative data and highlighting, by using selective data, improvements in one area while ignoring other important areas.
But greenwashing is in relation to corporate philanthropy is not always that black and white. What if you take the intention of the organization into account as well? If we look at corporate philanthropy, on the one hand, donating money or goods to a good cause causes a better reputation and maybe even free advertisement for the product a company donates. If the donation is done with those benefits in mind, or as the cause of the donation, it would be greenwashing. But would it still be greenwashing if the organization just uses philanthropy as a means to help other organizations out, and not with any intention of using it as a way to benefit themselves?
Of course this is something which no one can really check. No organization who uses philanthropy will admit they did it, or also did it, to benefit from it themselves. So greenwashing in relationship to philanthropy is not that black and white because finding the underlying motives is nearly impossible to do.
This first group sees Corporate Social Responsibility as a means to an end to make a profit and eventually to create wealth (Garriga & Melé, 2004). This view is the most well-known view and has been widely accepted in the field of business. The fact that it is seen as a way to create profit does not mean the companies interest do not exceed beyond the company itself; the interest of all stakeholders are taken into account as well (Mitchell, Agle &Wood, 1997).
This theory is in line with the Friedman view. Friedman states that only people have responsibilities and ‘business' is not a person. This means that the corporate executive has a responsibility towards his employers, the owners of the business and he has to run the company as they wish. And that wish is in most cases to make a profit, while abiding by the law (1970). Of course there are businesses for which this does not count, for example hospitals. In those cases, it is about rendering a service rather than making a profit (Friedman, 1970), but that does not change the fact that the manager's responsibility is towards the owners, and not towards society.
So if we summarize this, the instrumental perspective on Corporate Social Responsibility is that a company is there to make a profit, which will eventually lead to wealth. If we take this perspective into account and look at philanthropy, we can see that philanthropy must be to make a profit. For example, the Texaco and Mitsubishi Motors case: during the 1990s, there were scandals at Texaco. This was about allegations of discrimination and insensitivity. To cover up these scandals, these companies engaged in philanthropy, which improved their reputation (Ricks Jr, 2005). By improving their reputation, more people will be likely to purchase at those companies and that means that the profit will improve. Philanthropy is thus used as making a profit here.
If we now look at whether or not this would be greenwashing, the answer is: it is.
By putting the focus on their philanthropic actions, the companies try to “hide” their scandals. Since highlighting the good points of your organization while hiding bad points is greenwashing, this example is an example of greenwashing, using philanthropy.
Integrative and Normative Stakeholder Theory
The integrative theory focusses more on the influence of the social demands. An organization is supposed to listen to social demands and act according to them. The theories of this group are based on recognizing and responding to the demands and by doing so, getting social legitimacy, greater social acceptance and prestige (Garriga & Melé, 2004). This approach, called social responsiveness or responsiveness in the face of social issues, and managing them, arose in the 1970s (Sethi, 1975).
When it comes to stakeholders, the integrative theory looks from a whole different angle than the instrumental theory. Where the instrumental theory does take stakeholders into account, but still with the focus on making a profit, the integrative theory actually values the stakeholders´ opinions and even tries to integrate them into managerial decision-making (Garriga & Melé, 2004).
Another theory contradicting the instrumental approach is the normative stakeholder theory. This theory looks at stakeholder management from an ethical perspective and was founded by Freeman in 1984. He defined stakeholders as groups who have a stake or claim in the organization, such as suppliers, costumers, employees and shareholders. Whether or not the organization itself has interest in them does not matter; it only matters that the stakeholders have interests in the organization (Donaldson & Preston, 1995, p. 67). Using this theory, an organization has to take both the interest of stakeholders and of shareholders into account simultaneously when making decisions.
Managers in organizations using this theory must be good at making decisions. Otherwise there is a chance you get tossed back and forth between stakeholder opinions, all rooting for different decisions. To prevent this from happening managers must be direct and decisive, or this theory will not work and decision-making will be a very long, tiresome process which will get the organization nowhere.
This thus means that, according to these theories, there is more to an organization than making a profit, contradicting the instrumental theory. Organizations need to take the opinions of stakeholders into account and even integrate them in their decisions. The main focus of the integrative theory and the normative theory are the stakeholders, whereas the main point of the instrumental theory profit-making is.
If we take a look at philanthropy from this point of view, philanthropy does not have to be to make a profit. Since the normative and integrative theories have stakeholders as their number one priority, they act upon the opinion of their stakeholders.
If we look at the same Texaco and Mitsubishi case from this point of view, most likely the decision for making the philanthropic donations came from the stakeholders. They do not want to have a stake in an organization with a bad reputation. But, it still is a means to draw attention away from the scandals and create a good reputation for the company. Although the intention is different; the instrumental theory uses it as a means to make a profit, the outcome is the same.
Corporate philanthropy and greenwashing – a difficult relationship to identify. Corporate philanthropy is donating money, goods or time to another organization (Godfrey, 2005). Which seems a great thing. But, side effects from philanthropy are an increased reputation for the donating organization and advertisement for the product an organization donates. This is where greenwashing steps in: highlighting some points in an organization and hiding others to increase reputation and/or profit (Leighton, Roth-Arriaza & Zarsky, 2002). If philanthropy is used to achieve these side-effects, it can be seen as greenwashing.
To see whether this can always be seen as greenwashing or not, I compared two different kind of theories. The instrumental theory, which sees profit-making as the sole purpose of an organization, and the integrative and normative theories, which argue that organizations must always take the opinions of stakeholders into account, and even integrate them in the decision-making.
Using these two views on the Mitsubishi/Texaco case, both points of view would consider, in that specific case, philanthropy as greenwashing.
So, to answer my research question: is corporate philanthropy always a form of greenwashing? The answer is still unclear. Even though for both views the case was a form of greenwashing, we cannot state that all cases of philanthropy are a form of greenwashing. Greenwashing is namely very complex and just because it may be true in this case, it does not have to be true in every case. It mostly comes down to the point of intention and finding the true underlying motives of the donations an organization makes.
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