Thursday, January 12, 2017

Moral Licensing - The Dark Side of Philanthropy

There is a growing trend associated with the relationship between business and civil society that has sparked some interesting discussion. 

Consider the following:

Growing Power is an NGO that works with youth to establish community food systems where local stakeholders grow and distribute food.  Several years ago, Growing Power was offered a donation of $500,000 from Monsanto as part of Monsanto’s ambition at the time to help youth in need.  The money would have been a boon for the struggling NGO to help expand their infrastructure of independent food communities for marginalized youth. 

In a seemingly unrelated story, Pfizer, this past year, offered to donate one million pneumonia vaccines to Doctor’s Without Borders.  With pneumonia being the leading cause of death in children (1.4 million per year), the donation would have been a boon for the efforts of DWB in developing country regions.    

Yet both Growing Power and Doctors Without Borders rejected the donations!

In explaining their decision, a spokespoerson from Growing Power explained:

“We turned it down because of the kind of work we do, the belief in our vision...we advocate seed saving and slow food, and...if we accepted the Monsanto funds we would have legitimized their work.  Our youth look to us as role models.  You’re no better than what you are trying to defeat if you do the same thing and get sucked into that system”

Similarly, someone from Doctor’s Without Borders explained

“I’m all for donations…but in this case, to accept a donation is to accept the status quo in which health technology is beholden to the priorities and values of [comanies like Pfizer] whose interests exceed simply finding a solvent path to technlogical progress and human well being. While the donation would benefit people under the Care of DWB immediately, accepting it could mean problems for others, and problems longer-term”

Growing Power and DWB are part of a growing number of non-governmental organizations and social enterprises that are rejecting donations from the very organizations that spawned their creation.  This is fascinating to me because it means that society is beginning to connect the dots when it comes to the causes and persistence of social problems.  In the above two examples, Growing Power and DWB recognize that accepting these donations not only represents a drop in the bucket of a major problem, it also validates the behaviour of Pfizer and Monsanto to continue their egregious behaviour.  In the case of Pfizer, and their pharmaceutical company peers, the fundamental source of frustration for DWB is the problem of accessibility of the drugs.  Accepting the donation would give license to Pfizer to continue disrupting market forces that would otherwise keep prices accessible to the public.  In the case of Monsanto, the purpose of Growing Power is to challenge the very fabric of Monsanto’s business model.  Monsanto’s business model is as ingenious as it is deplorable in its attack on food independence because its thrust is to monopolize the food system.  If Growing Power were to accept Monsanto’s donation, they would be validating their behaviour and undermining their very purpose as a non-governmental organization. 

What is more fascinating to me though is thinking about why Monsanto and Pfizer’s are offering these donations.  Academic literature points to a wide range of explanations. One is that Monsanto and Pfizer are trying to offset the growing pressure from society to curb their egregious behaviour and its negative impact on society.  One way to do this is to donate a portion of the profits you’ve made from this behaviour.  Another explanation is that it is useful to target those stakeholders who have the greatest salience in terms of media splash about the damaging effects of your behaviour.  Although, on the surface, it looks hypocritical to support the very organizations that have emerged as a result of your behaviour, the decision is well calculated.  For one, if an organization like DWB accepts the donation from Pfizer, there is a better chance that DWB will lessen the complaints about Pfizer and instead focus on the competition.  Also, it paints a relatively positive picture that although the companies are complicit in the social issue, they do care by contributing part of their profits.  Consumers can acknowledge this effort and justify Pfizer’s more sinister behaviour elsewhere.

Although these explanations make sense, I offer an alternative called moral licensing.  Moral licensing occurs when a person, group, or organization gives itself permission or license to do something “bad” because it has done something “good”.  Consider a simple example, in the rare occasion that I rent a car, I decide to go with a gas guzzler (e.g. hummer) because 99% of my travel is through environmentally benign public transit. 

I think that moral licensing is the primary reason why companies like Pfizer and Monsanto set out to donate large sums of money to organizations like Growing Power and DWB.   As the quotations state above, if companies donate money to these causes (something good), they are better able to justify the negative impact (something bad) of their core operations.  If this explanation holds, it means that Pfizer and Monsanto are likely behaving worse than had they not given the donation.  Executives, when thinking about whether to arbitrarily increase prices of drugs or further their monopoly position on seeds, will think of the donations they’ve made to these organizations in deciding how far they should go in these efforts.  Had they not made these donations, they may pull back on some of the more egregious forms of social toxicity. 

How prevalent is this practice?  Evidence of moral licensing is everywhere and is useful in explaining some bizarre phenomena.  For instance, rankings of corporate social performance and responsible business are often ridiculed because the very companies that make the top of the list are the same companies a week or two later that end up in the news regarding some scandal.  Similarly, ethical funds (e.g. NEI Investments) filter out companies that are meant to be responsible leaders in their industry.  Yet these same companies are fraught with scandal.  Consider CIBC, a Canadian bank that is on NEI’s Canadian Large Capital Fund, recently faced a major ethical scandal when the media exposed that it helped set up offshore accounts to facilitate tax avoidance for some of its major clients.  Barrick Gold, similarly touted as a leader in CSR in light of the millions of dollars they’ve contributed to social programs, regularly faces a barrage of complaints regarding barbaric practices in developing regions. And TD likely justifies their reluctance to withdraw funding to the North Dakota Access Pipeline because they do so many wonderful social and ecological initiatives elsewhere.

I call on other organizations receiving donations from large companies to reflect on how the more fundamental operations of these businesses (everyday decision and behaviour) actually undermine the cause that represents your existence.  I call on organizations that accept funding from CIBC’s Run for the Cure, organizations that receive funding from Tim Horton’s healthy eating programs, among others to think about joining a movement of organizations that forces companies to rethink their fundamental business proposition by shaming them the next time they offer a donation. 

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