28.8 CSR Risks

When companies adopt CSR policies, they take on both opportunities and risks. Here are some of the key risks:

Higher Costs 

Implementing CSR programs often requires significant investment in areas such as sustainability, community engagement, or employee benefits. These costs may reduce short-term profits, which can create tension with shareholders focused mainly on financial returns.

Accusations of “Greenwashing” or “Woke Capitalism”

Greenwashing refers to a company presenting itself as environmentally responsible while its actual practices do not match those claims. This can involve exaggerated marketing or misleading labels that make products or policies seem more sustainable than they are.

Woke capitalism is a term used by critics to describe companies that take public positions on social or political issues as part of their branding. Supporters see these actions as part of corporate responsibility, while opponents view them as counter to their own political views, insincere, or distracting from a company’s core mission.

Either perception can harm a company’s reputation if stakeholders believe the efforts lack substance or authenticity.

Competitive Disadvantage

Companies that raise wages, improve benefits, or adopt stricter environmental practices might face higher operating costs than competitors who do not make the same commitments. In highly competitive industries, this can make it harder to compete on price.

Legal Risks

Public commitments to CSR can create legal obligations. For example, if a company pledges to reduce emissions or improve labor standards but fails to meet those goals, it could face lawsuits, or loss of consumer trust.

Stakeholder Expectations

Once a company commits to CSR, employees, customers, and the public expect it to follow through. Falling short of those expectations can damage credibility and trust more than if no promises had been made in the first place.