Social Responsibility & Profit

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I get really excited when I talk about social responsibility.  So, I couldn’t wait to respond to Paul Borawski’s post and learn more about the white paper ASQ worked on with Manpower… very interesting stuff!

In the classroom, I like to start the discussion by talking about Milton Friedman’s opinions where social responsibility is concerned. Friedman had noted that “there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” He essentially argued that business, as a unique entity, is not capable of having “responsibility.”  Logical, sure… practical, no…

I ask my students to review Friedman’s stockholder focused perspective with one that incorporates the stakeholder.  I don’t think most people necessarily make the stakeholder connection or understand the Triple Bottom Line (people-planet-profits) implications. But, as people become more aware and knowledgable, I think they develop solid support for social responsibility and want to see more in play. The great divide among consumers would likely be who would be willing to support it where financial decisions are concerned.  Regulation would be the only true expense, if it came down to it.  Otherwise, I think paying more is a misconception… especially when you’re talking about business “value.”

Also in the classroom, I discuss Pro QC’s role in social responsibility, which is something I’m very proud of.  As an organization, we have provided social audits for over a decade now.  I can recall attending a Social Accountability International conference up in New York several years back.  It was truly a defining experience to see the movement of corporate social responsibility really start to gain momentum! My students stay pretty engaged when I go over example audits and discuss various implications towards corrective action items.  You can tell it’s a topic that generates curiosity and interest.

A few months ago, I was pleased to get my hands on the ISO 26000 SR guidance documentation and wrote-up an article relating to how Pro QC social audits have evolved from the SA 8000 guideline.  In writing the article, one of the most interesting components of the research was an interview with Rob Steele, ISO Secretary-General… a very inspiring and emotional account of the collaboration and effort that it took to finalize and issue the 26000 document. Having the International Organization for Standardization’s support will undoubtedly add a level of status appeal for companies looking for a reason to invest in a proactive strategy.

To me, the issue of social responsibility is very straight-forward.  I believe in the realization of profit, as derived from an organization that operates for stakeholders and not just stockholders.  I believe that voluntary actions towards CSR provide calculable revenue where competitive advantage is concerned.  These two factors alone are fairly easy to identify and incorporate into the ROI.  Note that when you start talking about business “value”, you start talking about “relative worth”… So, despite the realization that regulation is likely going to be in play, social responsibility is a no-brainer from pretty much any perspective you look at it from. The economic incentive is too great to ignore!

In contrast to Friedman, I believe that businesses, as unique entities, are in a favorable position to affect our planet and the life contained within.  I believe they are capable of achieving this and seeing increased profits as a reaction to their actions.  What’s that old saying?… “you get out what you put in?” I think it was actually Aristotle who said that… it works well here, anyway.

3 Comments

2 Comments

  1. James Martin  •  Apr 5, 2011 @3:50 pm

    In the social sciences, the concept of corporate social accountability is understood as the philosophy of Communitarianism, where business entities “give back to the community.” The motivations for such action are two-fold.

    One: Communitarianism may be tied to public relations, where the business entity is pursuing political interests. Political interest is associated with an anticipation of the rewards and benefits from political participation. In this case, business is developing a local (or broader) base of public support that can translate into political support for, or opposition to legislation that can directly affect the bottom line.

    This POV may better meet the attributes of consumer-driven businesses such as oil companies, big box-department stores, manufactures etc. that have a direct impact on the businesses immediate catchment area. This manifestation of Communitarianism is viewable in mass media marketing campaigns, or demands on employees to actively volunteer in community affairs, or through philanthropy via contributions to community organizations and neighborhoods. The approach ultimately focuses more on the businesses institutional environment because of its political agenda.

    Two: Communitarianism may be linked to a business philosophy that places a certain degree of emphasis on liberal ideology for the purpose of creating a healthier, more productive community for residents and employees to enjoy. This paradigm of social-economic environment asserts that amenable community environments indirectly raises productivity by creating positive and immediate psychosocial relationships between employers, employees, and communities that reduces personal stress among all relative parties, thereby, stimulating greater creativity, productivity, and more effective management. Hence, this approach ultimately focuses more attention to the business’s performance at the level of internal organizational environment.

    Due to the fact that business operates in a social environment, neglecting this environment presumes operating in a vacuum which is nonsense and ultimately counterproductive. When businesses are unable to structurally adapt to changing external environments, then that business entity will lose its competiveness in the longer span. Although, external environmental changes are typically associated with changes in the organization’s task environment, a broader view will validate community as an important socioeconomic dynamic impinging on organizational performance.

    Social accountability. therefore. is more than a welfare orientation. It’s a necessity for business survival in a 21st century global environment.

  2. Terrance Czosek  •  Jul 8, 2011 @3:15 pm

    WordPress…?