Profit and Corporate Social Responsibility: a Philosophical and Strategic Dilemma

In the current complex economic ecosystem, balancing the pursuit of profit with Corporate Social Responsibility (CSR) represents one of the most significant challenges for business leaders. This tension is not merely practical but deeply philosophical: it touches the core values that define the purpose and legitimacy of organizations in the world.

Exploring the historical and philosophical dilemma underlying this topic offers a valuable perspective for better understanding the forces at play, the inherent contradictions, and the possibilities for harmonizing these seemingly conflicting objectives.

The Philosophical roots of the Dilemma: between utilitarianism and deontology

In the 19th century, early economic reflections on business were grounded in the fundamental assumption that profit was the primary objective. This view aligns with Jeremy Bentham’s utilitarianism, which posits that the greatest good for the greatest number of people is achieved by maximizing productivity and economic efficiency. Adam Smith, in his Wealth of Nations, introduced the idea of the "invisible hand", asserting that pursuing self-interest within a competitive market system indirectly leads to collective welfare.

However, this optimistic paradigm soon revealed its shortcomings. Karl Marx, for example, harshly criticized the capitalist system, highlighting how the pursuit of profit at the expense of workers led to alienation, inequality, and social conflict. His critique remains a foundational challenge to capitalism, emphasizing that profit maximization often clashes with human dignity and the demands of social justice.

From a deontological perspective, Immanuel Kant offers a different evaluative framework: organizations and leaders must consider not only the consequences of their actions but also the respect for individuals as ends in themselves. Kant reminds us that workers, consumers, and communities are not mere means to an end but moral entities whose intrinsic dignity must be respected, irrespective of economic performance.

More recently, contemporary thinkers—from Emmanuel Levinas’s ethics of otherness to Stefano Zamagni’s civil economy—have enriched this perspective, suggesting that a sense of responsibility is not merely a moral obligation but a condition for sustainable prosperity. Business leaders are thus called to reflect on how their decisions address not only material needs but also intangible dimensions—trust, respect, fairness—that sustain social cohesion and long-term sustainability.

Industrial evolution and the return of CSR

In the 20th century, attention to social issues cyclically resurfaced during crises, often as a response to events that questioned the very foundations of the economic system. In the 1930s, the Great Depression forced governments and businesses to reassess the social impact of their actions, prompting regulatory interventions and the introduction of welfare measures to stabilize society and rebuild collective trust. This period also saw greater awareness of the need to balance market dynamics with active support for communities and workers.

In the 1970s, a new paradigm emerged with Milton Friedman, who reasserted the doctrine of shareholder primacy, arguing that the sole social responsibility of business was to increase profits for shareholders, provided it operated within legal boundaries. This view simplified business management into a predominantly economic dimension, dominating managerial thought for decades. However, this approach was also increasingly criticized for neglecting the long-term implications for workers, the environment, and communities, fueling debates about a more inclusive and sustainable economic model.

Friedman’s mantra—that "the business of business is business"—appears increasingly fragile today. Financial crises, corporate scandals, and environmental disasters have exposed the contradictions of a purely shareholder-centric model. The collapse of institutions like Lehman Brothers in 2008 or ecological disasters such as Deepwater Horizon in 2010 demonstrated that ignoring stakeholder interests can destroy not only human lives but also long-term economic value.

In this context, global movements like the United Nations’ 2030 Agenda and the growing focus on ESG indicators represent a radical paradigm shift. However, they also create a new tension: while they make addressing social and environmental issues indispensable, they require leaders to navigate complex and often conflicting expectations, especially in times of unprecedented uncertainty.

The Practical Contradictions of this Trade-Off

The compromise between profit and CSR is not merely theoretical. It has daily implications that many business leaders face:

• Shareholder Demands: Financial markets often reward quarterly performance, pressuring executives to prioritize short-term profits. This leaves little room for long-term decisions that might benefit other stakeholders.

• Costs of Sustainability: Integrating sustainable practices into business operations often entails significant initial costs. Transitioning to renewable energy, adopting circular production processes, and implementing worker welfare policies can erode profit margins, at least initially.

• Market Cynicism: In some cases, even the most high-level CSR initiatives may be perceived as "greenwashing" or "social washing" — superficial strategies that risk undermining the trust of customers and employees.

The German Mitbestimmung Model: lessons and vontradictions

An emblematic example is Mitbestimmung, Germany’s co-determination model between workers and management, which has recently been at the center of the Volkswagen crisis. This system, mandatory for large companies in Germany, is designed to balance the economic interests of shareholders with the social needs of workers.

However, as evidenced in Volkswagen’s case, this system is not without risks. While the works council is a powerful institution for protecting workers, it sometimes imposes difficult compromises and delays strategic processes, such as adapting to new global markets or transitioning to electric vehicles, hindering the agility needed in highly competitive markets.

The conflict between unions and management underscores how Mitbestimmung can fall short of preventing deep corporate crises if genuine collaboration is absent or if the company’s strategic goals diverge too greatly from workers’ needs. This reveals a crucial challenge: how to design governance structures that give all stakeholders a voice without paralyzing progress?

Takeaways

To effectively address this dilemma, leaders can adopt strategies rooted in innovative and philosophically sound approaches:

• Integrate a holistic business strategy: Treat profit and CSR not as opposites but as complementary dimensions. Creating value for shareholders means creating value for all stakeholders, ensuring every decision benefits the broader business ecosystem.

• Reshape decision-making timelines: Recalibrate the importance of the short and long term. Consider the short term as instrumental but make long-term value the primary driver of decisions.

• Agility-Inclusive Governance: Design decision-making models that involve workers and unions without compromising execution speed.

• Ethics as a business compass: Redefine ethics not as a constraint but as a strategic factor.

• Educate leaders with a philosophical mindset: Invest in management training programs that incorporate reflections on ethics, economics, and business philosophy.

Conclusion

Balancing profit and social responsibility is a journey requiring courage, vision, and competence. Modern leaders must see this trade-off not as a binary choice but as an opportunity to redefine the meaning of leadership and design organizations capable of thriving in harmony with people and the planet.

In the ambiguity of this balance lies the highest expression of the art of governance.