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The Social Responsibility of Business is Here to Stay

Leon Kaye | Thursday August 23rd, 2012 | 4 Comments

Over the next couple of weeks, we’ve asked our writers (and guests) to respond to the question “What is the Social Responsibility of Business?”  Please comment away or contact us if you’d like to offer an opinion.

Leon Kaye, CSR, what is the social responsibility of business, socially responsible business, the social responsibility of business, Leon Kaye

The invisible hand of the market is no longer visible (Wall Street, NYC)

What is the social responsibility of business? The debate over whether businesses have an obligation to do good in the communities and countries in which they operate will long rage on. Purists on the Milton Friedman side of the debate have a point when they insist that businesses should only maximize profits for shareholders; after all, here in the United States, that is the law. Forget about the ethics or how you feel about how businesses should be run: under U.S. business law, publicly held companies that do not maximize profits the way a shareholder sees fit could be taken to court by that cantankerous shareholder.

Naturally, many of TriplePundit’s readers feel differently, and that is understandable. The scandals of a decade ago that sullied the reputation of corporations such as Enron, Tyco and MCI Worldcom horrified even a Republican presidential administration and Congress and led them to pass the 2002 Sarbanes Oxley Act. Then, just when it seemed that our society had tackled the often incestuous relationships that complicated efforts towards more transparent corporate governance, along came the financial crisis of 2008. And while all corporations should not suffer a black eye for the shenanigans of a few, more citizens are demanding that businesses do more for their community. Add the social and environmental costs from which companies often walk away and expect others to clean up at their cost, and obviously the question becomes far more complicated.

But no matter what side you are on, or if you are part of that mushy middle, the debate is besides the point: Businesses are undertaking more social responsibility, and there is no going back. Socially and environmentally conscious business is not just feel good messaging, but it is good, smart business.

One reason why business is taking on more social responsibility is that large institutions are failing us. Political strife and overwhelming debt crises are crippling governments around the world and, in turn, are infuriating their already jaded citizens. In many countries, the church has faded from a strong role in many citizens’ everyday life, even here in the U.S., which arguably is the most spiritual and religious nation in the industrialized world. And despite the U.S. foray into two wars abroad, the fact is that our military does not have the huge impact on daily life the way it did even a generation ago when U.S. bases were ubiquitous at home and abroad. A smaller, leaner and technologically advanced military in part means that for many Americans, the only military they know about is through the updates they receive on cable news.

And while there is still angst about outsourcing, offshoring and downsizing, the fact is that at least on this side of the pond, business has an opportunity to fill in some cracks and make a difference where they operate. Campbell Soup Company, for example, has been aware of the impact its consumption of water can have on local communities, and has worked within those towns to become more water efficient. And in the company’s headquarters in Camden, NJ, Campbell’s employees are working with local schools and non-profits to improve local children’s nutrition and overall well-being.

Other companies are undertaking research and development projects that can help develop better and more sustainable materials. Nike is one such example; it is working with hackers and NASA on a bevy of projects from finding better alternatives to conventional fabrics to waste diversion. And with livestock production having a huge impact on the globe’s greenhouse gas emissions, PUMA’s search for a viable alternative to leather could pay huge dividends in the long run.

It is a stretch for now to assume that these and other companies could fill the huge shoes of both the U.S. space and defense programs and their lasting legacy during the post World War II era. Companies have not found the next Internet, GPS system or even smoke detector (all emanating from the defense and space programs), but the fact that more companies are joining and creating working groups and sharing, not hoarding, their technologies does give hope that the future can be cleaner.

Finally, more companies are realizing that treating their employees well is not only ethical, but also a business differentiator. In an era where many retail employees struggle to the point that they are on food stamps while working full time, Costco offers a great shopping experience for its customers while providing its employees competitive wages and generous health insurance plans. Zappos’ unconventional corporate culture and a focus on fun has made customer service jobs far more than just serviceable. Method rounds out the pack with environmentally responsible products and a spirit within the company’s offices that inspires creativity resulting in great products.

The stubborn fact is that companies are becoming more responsible and will only continue to be even more so. Some companies will try the tired old public relations spin of showcasing a product line or company ethos that is more posturing than progress; but in this age of social media and unrelenting bloggers, they will greenwash and spout out such nonsense at their own peril. So never mind whether Milton Friedman is right or wrong: his theory is just that, a theory. Social responsible business is now the standard practice.

Leon Kaye, based in Fresno, California, is a sustainability consultant and the editor of GreenGoPost.com. He also contributes to Guardian Sustainable Business and covers sustainable architecture and design for Inhabitat. You can follow him on Twitter. He will cover World Water Week in Stockholm next week, August 26-31.

Photo courtesy Leon Kaye.

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  • http://twitter.com/ethicsblogger Chris MacDonald

    Some caution is in order here, with regard to the claims made in your very first paragraph. Friedman didn’t say businesses should “only maximize profits.” He thought that corporate managers have other legal and ethical responsibilities. Likewise, I think it’s somewhat misleading to say that US law requires companies to “maximize” profits. My understanding is that it requires corporate directors to pay due attention to the interests of shareholders; what form that takes is up for grabs, and corporate managers get a fair bit of leeway under the “business judgment rule.” Sure, a corporation “can” be taken to court, but that’s true regardless. What matters is whether, and under what conditions, a suit is likely to be successful.

  • http://www.facebook.com/people/Tina-Reed-Johnson/1108075575 Tina Reed-Johnson

    Thank you for this article. At some point in the future I can see corporate/business social responsibility as being talked about as much as going green and environmental sustainability. I’ll be sharing this with my networks as part of a continuing effort to educate and inform!

  • Valerie

    Great article! In ever-growing numbers, businesses are recognizing that sustainability and social responsibility are not just ethical imperatives, but are an integral part of a strong business plan. The company I work for, earthbongo, has put together a collection of great resources on this topic. Take a look here: https://earthbongo.com/csr/resources

  • concrete things

    Important distinction to make here….

    “…business has an opportunity to fill in some cracks and make a difference where they operate. Campbell Soup Company, for example, has been aware of the impact its consumption of water can have on local communities, and has worked within those towns to become more water efficient.”

    So, cleaning up after yourself is now a good deed?

    I think in many cases, it’s not that companies need to do MORE FOR their communities. They need to do LESS TO their communities. People aren’t looking for charity, we’re looking for fair treatment. You don’t have to fix the problems we had when you got here, but you should refrain from making new problems. That’s not heroic, it’s basic.

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