Enron, the CSR Poster Child

By Robert Murphy
Saturday, April 26, 2008

For most Americans, Enron was the poster child of unfettered capitalism. After its fraudulent activities led to the company’s collapse, business ethicist Marjorie Kelly proclaimed, “The ideal of the unregulated market is flawed and it’s time we said goodbye to the invisible hand.” But as Rob Bradley argues in a provocative new essay (pdf), Enron was the epitome not of capitalism, but rather of the environmental Left and the corporate social responsibility (CSR) movement.

Bradley should know. He spent sixteen years at Enron, ultimately serving as a corporate director in public policy analysis, and even wrote speeches for none other than Enron chairman Ken Lay. (Bradley is also the founder of the Institute for Energy Research, a free market think tank with which I am affiliated.) Yet as a believer in capitalism—true capitalism, where consumers determine winners and losers, not the politicians—Bradley didn’t fit in so well with his peers. It seems the “smartest guys in the room” running the company decided that the best way to ensure profits was to put in the fix, courtesy of the government, and all sold to the public under the guise of CSR and “green” energy.

Enron’s key to (politically assisted) success was to lobby for “farsighted” government policies that just so happened to give the company an advantage over its competitors. For example, because it was heavily invested in natural gas production, transmission, and electricity generation, Enron would benefit from regulations on carbon dioxide emissions. (Natural gas is less carbon intensive than oil and especially coal.) Enron also was far ahead of the curve in investing in alternative energy sources such as wind and solar power.

Given its business position, it’s not so surprising that Enron supported the Clinton administration’s 1993 proposal for a Btu tax, spearheaded the nation’s strictest renewable energy mandate in Texas in 1999, and lobbied the Bush administration to regulate carbon dioxide emissions. Its actions on these fronts were as self-serving as those of domestic manufacturers who petition Congress with their concerns over “unsafe” Chinese imports.

In addition to its green initiatives, Enron was a model for the CSR movement. In 2001 its CSR task force listed some of its accomplishments, some of which are reproduced below from Bradley’s essay:

· Secured board oversight of social/environmental performance

· Expressed support for Universal Declaration of Human Rights

· Established formal partnerships with WBCSD [World Business Council on Sustainable Development], IBLF [International Business Leaders Forum], and CI [Conservation International]

· Responding to stakeholder concerns on an ongoing basis

Now at this point, advocates of CSR and so-called sustainable energy policies might object. “No kidding,” they might say, “that the lying Enron also lied about its socially responsible policies. What else do you expect from greedy capitalists?” But there are two problems with this objection.

First, Enron really did engage in all of the “sustainable” practices that the environmental movement champions. Enron really did invest in wind and solar power, and really did lobby for renewable mandates and carbon dioxide emissions. So at the very least, Enron’s leftist critics should concede that it unwittingly did “the right thing,” though for ignoble reasons.

Second and more important, it wasn’t just Enron brochures that touted its green credentials. On the contrary, Enron received a climate protection award from the EPA, and a corporate conscience award from the Council on Economic Priorities. During the Kyoto meetings in 1997, Enron’s representative received an award from the Climate Institute on behalf of the company and CEO Ken Lay. To reiterate, the point isn’t that Enron fooled the genuine environmentalists, just as it had fooled investors. No, Enron really was doing everything that these activists desired from responsible businesses. Given their stated recommendations, these groups were correct to lavish praise on Enron.

Guilt-by-association is always a weak charge. Obviously, just because the best representative of corporate social responsibility and sustainable development also happened to be the most notoriously corrupt company in business history, doesn’t actually prove that CSR or modern environmentalism are bankrupt movements. But it certainly doesn’t help their cause.

American liberals should rethink their obituary of Enron. Far from representing true laissez-faire capitalism, the company instead showed the corrupting influence of government favoritism. Rather than conjuring up visions of Adam Smith, the name of Enron should remind us of the memo its representative sent from Kyoto that concluded, “This agreement will be good for Enron stock!!”