NCPA - National Center for Policy Analysis


July 18, 2005

Environmental groups are bombarding individual companies with everything from seven-year-old protesters to resolutions at corporate conferences. They're pushing an agenda in some of the unlikeliest places imaginable, but they've enjoyed a surprising measure of success, says John J. Miller (National Review).

Their efforts generally fall under a broad rubric known as "Corporate Social Responsibility" (CSR) -- the notion that businesses must be good citizens who don't do bad things, such as make cigarettes, distill alcohol or spew anything from smokestacks, says Miller.

Encouraging companies to behave in a "socially responsible" way is one of the hottest trends in the investment world:

  • In 2003, assets worth more than $2.2 trillion were tied up in accounts that contained criteria separate from the standard categories of risk and return.
  • Between 1995 and 2003, overall investments into CSR funds outpaced conventional funds by 40 percent.
  • Pax World Funds, the first CSR mutual fund, refuses to invest in defense contractors on the grounds that they cause war.

CSR advocates lately have taken to arguing that their policies are good for the bottom line -- that green is green, so to speak. "They don't just serve social interests, but also corporate interests," says Tim Smith, chairman of the Social Investment Forum. "Companies see green policies as part of their long-term business strategies."

Maybe so. But that doesn't make them smart policies. As supply-side guru Arthur Laffer reported in a recent study co-authored by Andrew Coors and Wayne Winegarden, there's precious little evidence that CSR is a gainful business model. "In terms of compound annual net income growth, net profit margin and stock price appreciation, only a minority of the CSR companies outperformed their competitors in each category," they wrote.

Source: John J. Miller, "Birkenstocks And Stocks," National Review, July 4, 2005.


Browse more articles on Environment Issues