Is there a “market for virtue”? If so, what can it do, and what can it not do to improve our world? In his incisive new book, David Vogel takes aim at these questions and the now-fashionable claim that there is a business case for corporate social responsibility (CSR). He concludes that there is no business case that can be generalized to all firms per se, but there is a political case for broadening what we mean by that much-used term.

Vogel begins by distinguishing the older notion of corporate responsibility that emerged in the 1960s and 1970s from the current version. In the older account, few expected social responsibility to help the corporate bottom line. In the newer version, firms do good to do well. He writes: “Virtually all contemporary writing on CSR emphasizes its links to corporate profitability” (p. 19).

Consider the example of socially responsible investing (SRI). When it was first politicized in the late 1960s, to “enable investors to reconcile their portfolios with their consciences,” there was no assumption “that a more ‘responsible’ portfolio would perform better or even as well as a less responsibly managed one.” Today, those advocating social investment “claim that it makes financial as well as moral sense” (p. 22). In general, advocates of CSR today feel they must “demonstrate, first, that behaving more responsibly is in the self-interest of all firms, and second, that CSR always makes business sense” (p. 34). There is faith—this is my word—in the premise that profit and social responsibility mutually enhance each other. The problem, Vogel finds, is that the evidence does not support the faith.

According to the author, “the consensus of the more than 100 studies of social investment funds and their strategies is that … share returns are neither harmed nor helped by including social criteria in stock selection” (p. 37). Some strong and well-positioned firms may be able to build relatively more responsible behavior into their business plan, and some firms in the nongovernmental organization (NGO) spotlight may do so to prevent being financially punished by anticorporate campaigns. Nevertheless, CSR costs money, a fact obscured in turn by the popularity of “the business case” and because CSR expenditures are quite low, falling “well within the limits of discretionary spending” (pp. 164–65). “But if companies were more virtuous,” he writes, “the costs of CSR would become much clearer” (p. 166; author's emphasis).

Vogel's argument is a rebuke to those who want fat profits and easy consciences, too. His analysis is particularly sharp at questioning conventional assumptions. Does SRI portfolio prescreening, using normal financial criteria, remove companies that are socially superior but financially marginal, thereby giving a misleading impression of the financial viability of “socially responsible investing”? What constitutes a socially responsible company in the first place (pp. 39–40)? Yet Vogel is not a scold. The desire to build a business case for social responsibility in recent years, he argues, reflects the tightening constraints on corporations in today's global investor capitalism, driven by financial markets, where shareholder value of necessity “has become a central objective of managers” (p. 26).

Vogel's work is rich in detail, as he reviews the experiences of companies such as Nike, Ford, and Shell, social labels such as Rugmark, and NGO strategies like consumer boycotts and divestment. Consider some of his conclusions. Because coffee under the Fair Trade social label is comparable in price but not quality to specialty coffee, it struggles for market share, thereby limiting the impact of its business model. After four years of doubling in size, sales still constitute only 0.4 percent of global coffee purchases (p. 106). While some consumers will pay extra for products that provide tangible benefits, “few consumers are willing to internalize the environmental externalities of what they consume.” Globally, comparatively few voluntary codes govern corporate environmental practices (pp. 135–36). In the area of human rights, not even efforts by NGOs to point out to investors the business risks of investing in corrupt and repressive regimes have much traction (p. 160).

In order to prevent firms that want to act responsibly from being disadvantaged in the marketplace, compliance standards need to be raised for all. This can only be accomplished adequately by changes in public policy. Because the public policy positions the corporation takes “may well be “the most critical dimension of corporate responsibility,” Vogel concludes, “the definition of corporate social responsibility needs to be redefined to include the responsibilities of business to strengthen civil society and the capacity of governments to require that all firms act more responsibly” (p. 172; author's emphasis).

Vogel situates his work in what he would like to appear to be the reasonable middle between critics on the right, such as Arthur Laffer, who argue that CSR is actually irresponsible to shareholders, as well as risk-averse, and those on the left, such as David Korten, who argue that profit-driven corporations are constrained from doing the right thing. Although there are important differences between them, Vogel's appreciation of structural limitations to self-regulation—the weakness of the business case for CSR is one indication of those limits—and the central role of government regulation are closer to analysts like Korten than he acknowledges.

Vogel's rhetorical style, however, on occasion, clouds his actual position. He concludes his book by writing, for example: “Civil and government regulation both have a legitimate role to play in improving public welfare. The former reflects the potential of the market for virtue; the latter recognizes its limits” (p. 173). True enough. The fact remains for the author, however, that although civil regulation has done some good, and can do more, it has not and cannot come close to achieving the scope of changes he thinks necessary. For CSR to be really effective, the costs it engenders “need to be passed on to some combination of consumers, employees, and investors.” To accomplish that end, government must become more involved. Because there is no business case for corporate social responsibility that is applicable to the corporate world in general, political means must be sought to achieve the objectives of decency, sustainability, and rights. As Vogel trenchantly puts it, “The market for virtue does not clear” (p. 165).

If I am right to adjust the positioning of Vogel's narrative, several questions follow him. Will efforts to include the political priorities of corporations within the definition of CSR meet fatal resistance from corporations? Were they to be included, what impact would they have in changing public policy as they run up against the constraining conditions of their consequences for profit and price that Vogel documents? Is it then necessary through policy changes, values, and political virtue to loosen the constraints that create binds for governments, corporations, and consumers in the first place? For example, should we simultaneously endeavor to ease the cycle of work, spend, and debt that Juliet Schor and others point to, and renegotiate international trade agreements to better incorporate worker, environmental, and rights standards?

What is a “market for virtue”? Virtue, after all, is by definition something you do simply because it is right. It is not a product and it is not for sale. Perhaps we should instead think about building a political and economic marketplace in which worker standards, environmental regard, and human rights protection have a far higher profile in democratic deliberation and decision making than they do today. This, I think, is Vogel's real project. In engaging it with intelligence, precision, and craft, he has advanced significantly the debate on corporate social responsibility by setting the direction in which it needs to go.