The limits of CSR goals according to Drucker

Peter Drucker’s immense contribution to the thinking and practice of management extends to social responsibility in business.

While his work spans over 60 years, it still remains relevant today — notwithstanding the impacts of globalisation and the greater interconnectedness of business and society.

After first identifying Drucker’s corporate social responsibility “principles,” this article examines their implications for business today, particularly with respect to marketing practices.

We also consider Drucker’s views on the limits of social responsibility, or “bounded goodness,” and examine how his thinking informs the challenging question of “how much is enough?” when it comes to corporate responsibility issues.

Drucker consistently affirmed his belief in social responsibility in business (and other institutions).

After all, his earliest writing, The End of Economic Man: The Origins of Totalitarianism, and The Future of Industrial Man, indicated as much.

Moreover, by examining the grounds for corporate legitimacy, his works also detail the social responsibilities of management.

In Management: Tasks, Responsibilities, Practices, an 800-page treatise, Drucker devotes five chapters to social impacts and social responsibilities.

Consistent with these beliefs, some of his later writing addressed social responsibility directly, whereas other works, such as his last book, Management Challenges for the 21st Century, did so more indirectly by describing his humanistic conception of management and his concern for the social role and responsibilities of business.

Drucker differentiated between two types of social responsibilities: those involving social impacts or what business does to society and those involving social problems or what business can do for society.

Social impacts go beyond the specific contribution the company exists to make, such as providing needed products and services.

They are often unintended but inescapable by-products of business, as part of, and serving, society.

According to Drucker, social impacts are best eliminated once they are identified.

His principle was clear: identify and address — if not eliminate — undesirable social impacts of business activities and, if they cannot be turned into profitable business opportunities, seek a regulatory solution (industry self-regulation or government regulation) that creates an optimal trade-off for all involved.

Drucker also viewed social problems as sources of opportunity.

He suggested that while business has responsibilities in relation to social problems, there are also limits to social responsibility in this regard.

Fast food firms

In answer to the question “when to say no?,” or the limits of corporate responsibility, Drucker suggested that an organisation resist any demands for social responsibility as a response to social problems when this would impair the business’s performance capability, exceed its competence and usurp legitimate authority (such as that of government) or would involve illegitimate authority.

For example, fast food companies certainly appear to have a responsibility to help eliminate the negative social impact of their products’ contribution to childhood obesity.

Make donations

By contrast, pharmaceutical companies that are asked to donate life-saving drugs to all who need them are responding to social problems rather than social impacts.

They are not responsible for the limited health care budgets of developing countries that preclude purchasing drugs at developed country prices, but they might choose to act on making essential medicines more accessible nonetheless.

Immense light

Drucker’s writing sheds immense light on the management of business and other institutions, remaining as fresh and relevant today as it did decades ago.

This is no less true of his writing on social responsibility.

In some respects, his insights might be taken for granted and they are far from a complete understanding of social responsibility as it is conceived today.

However, Drucker’s distinction between social impacts and social problems remains a key consideration, and his three limits on corporate social responsibility in response to social problems (performance of the firm’s specific mission, competence and authority) are still valid even if they only provide a foundational understanding and don’t sufficiently answer the question, “how much is enough?”

Smith is a professor at INSEAD.