Corporate+Responsibility

Chris Knortz 10/3/2011 Business Responsibility Sustainability Problems

The world economy has developed over the last century on the basis that resources on this planet are unlimited and easily accessible. This extends to the planet’s ability to absorb and reduce waste. These beliefs have been followed to an extreme level in the U.S. Form the beginning of the nations development people believed that there would always be more farm land and resources over the next hill, and for a long time this belief was held true. Even now this is a common idea in modern culture that has developed into consumerism and a resource intensive lifestyle with little consideration for the effects of such consumption. There in an emerging idea that companies must become responsible for their products during the entire life cycle of the product. This involves companies either having a social conscience on their own to only produce products with a minimal amount of harm to the environment and society. The other idea is that companies have no responsibly other than to make profit. It must be the public who demands more responsible products and the companies oblige in order to stay profitable. Inside each argument there are many smaller issues that must be addressed. The final goal is to create a system that puts less stress on ecological and social systems. The argument that business and corporations have the same interests and morals as other human beings is used to support a move to an ecologically and socially sustainable business model. This argument is presented by Joe DesJardins in his article “Business and Environmental Sustainability”. He breaks down a new model for a sustainable future with business adhering to the “three pillars of sustainability”. This involves business and corporations following three moral and ethical principles of economics, ecology, and ethics. In the current system, participants in the economy are not encouraged to adhere to these values, but rather to only making money for themselves. This has evolved to an economy that is based on a devastating system of growth and resource consumption with no regard to the waste and damage being done. Consumerism is the extreme example of such a system. Currently the only possible economic progression is seen as growth, selling more products. One extreme example is the development of the personal computer. This is and industry that was nonexistent 30 year ago and was fabricated by a couple of companies. Businesses are forced to produce more and then convince consumers to purchase more. This economic model has put enormous strain on the biosphere and societies around the world. If companies operated in accordance to the three pillars of sustainability, there would be economic benefits for those companies. Desjardins argues that these companies who adopt innovative practices sooner will have the advantage when governments and societies do eventually realize the benefits of sustainable practices, making these companies hugely profitable in the future economic revolution. To be truly sustainable a corporation or business must consider the entire effect of their business or products. Understand the effects of a decision can only be done when the entire range of effects in the present and future are considered. This would then show the economic benefits of being sustainable on a broader field. The ideas presented by Desjardin do not specifically address the problem of government in these issues. One of the basic purposed of government is to protect the people. According to him many of the practices used in the current economy are very harmful to the environment and society. This can be seen in the occurrence of health problems to the lack of happiness in people because of over work. These are all issues that the government has a responsibility to address. In his article his only mention of such an issue is companies receiving tax incentives to for employees working longer hours. No suggestions to solve this problem. There is also little suggestion to how corporations and business should change their decision practices other than acquiring social responsibility. Stock holders still hold a large amount of the power and their concern is to make money in a relatively short amount of time when compared to the ecological changes they are causing. Stockholders do not generally know the production practice of the companies they hold shares in. Even if the culture and decision making process of a company were to be changed by the internal management, it would be difficult to make this transition without monetary consequences that the shareholders would notice. Desjardins only states that there needs to be a change not directly how that changed should be persuaded. This may be where companies need to make a short term sacrifice, but to succeed there needs to be an educated support system of willing shareholders and customers. This can be difficult with a large lack of education in regards to general sustainability among the public. In this discussion there is also the idea that corporations do not have any social responsibilities, they are only concerned with making a profit. This argument is laid down by Milton Friedman in “The Social Responsibility of Business is to Increase its Profits”. Even though the employees of a corporation can have morals and responsibilities, they are of no concern to the corporation when the employees are making decisions for the corporation. This thinking comes from the idea that the people at the corporation may not be in the best position to make decisions that are not in their field of expertise. If they do make such socially minded choices, they may in fact be making situation worse or not using resources effectively. This socially minded action would make the employee a civil-servant. It is unacceptable for a non-elected civil servant, a socially minded employee, to be making decisions with tax payer’s money, customers, with out and election. Later Friedman argues that governments have the responsibility to impose taxes to finance social and environmental projects. Also he states that it is for the shareholders of a business to demand responsible practices. The long term benefits of sustainable decision making by a company are considered. However, Friedman is of the opinion that a company is only making such decisions to cover up some other profit oriented objective. In the end there is no existence of social responsibility for a business or an individual, only the shared values and responsibilities of individuals. People and companies are to make decisions that will benefit them in the short term and long term for their own self-interests and in doing so the entire society will benefit. Friedman argued that it was unacceptable for an employee to act as a civil-servant because that was not their responsibility to impose taxes on a population and make the decision on how to allocate those resources. Is it not also unacceptable for a person who has morals and values to allow themself to be responsible for a decision that does not follow those rules? It may be true that a corporation as an entity does not have responsibilities to society other than its shareholders, but the people making decisions, both shareholders and employees, have responsibilities to their own long-term self-interests. If the long term was included in this process the choices could be vastly different. When Friedman closes his article, he makes a statement about business should pursue profit as long as they “stay within the rules of the game”. This is used to encompasses government and broad established social rules, however if this statement is expanded to consider the rules of the ecological system, business decisions would look vastly different. There in an emerging practice among corporations to document their social responsibility for the year. Sallie Pilot, a researcher as Black Sun, a strategy and marketing agency, was the author of the article, “Companies are Embracing Corporate Responsibility in Their Annual Reports”. This was found in an International Integrated Reporting Committee (IIRC) research program. Their goal is to establish an international framework for reporting on a business’s long term prospective in a clear and concise manner for investors while taking into account the business’s social practices. The increase participation of companies around the world to provide non-financial information about the companies’ practices indicates the change in the importance of such issues. Companies are beginning to see the long term benefits of such representation to their consumers and shareholders. This means that these companies must also increase their socially responsible actions in the future to remain competitive with a more knowledgeable public. This system of representation to the public appears to be a compromise between both Desjardins and Friedman. The corporations are making social responsible decisions on their own moral grounds then using that to market themselves to their customers and shareholder. This pattern goes along with DesJardin’s thinking. These companies are starting to see the future economic benefits of being ethically and ecologically responsible, falling into the three pillars of sustainability. They are also seeing the future shift in that direction and hoping to benefit by being early adopters. The Friedman ideas are also being used. The companies are providing information to encourage shareholders and consumers to use this knowledge to make more responsible decisions. However this does not encourage further government taxation and regulation as Friedman would prefer. In the end both articles, Friedman and DesJardins, described systems and ideals that could be used to work toward a more sustainable future. The method was different but the final idea was very similar. In the end of the Friedman article there was a statement that said that companies must “stay within in the rules of the game” which can be looked at as the rules of government and social acceptable practices and allow those to change the companies practices. One of the main arguments of the DesJardin article was that it is in a companies’ best interest to adapt to these social and environmental issues on their own and pull consumers along. Both these arguments are in the same direction, the only difference is the realm of knowledge, Friedman allows companies to only look at the laws of society and government, where DesJardin looks at the laws of nature. This realm on knowledge is the focus of the attempt to report on the social responsibility of companies by the IIRC, further work like this may be able to bring significant change. In the future a well balances approach that is a combination of both ideas should be used to change the ecological impact of economic activity. The social and ecological problems of today are not only caused by a lack of responsibility in companies, but also a lack of responsibility in government, policy, and public support. There are many cases where a person knows of a problem but does not feel it is there responsibility change the situation, when in fact if that person has any knowledge of that problem it automatically becomes there responsibility. Also in government, there is a policy of decision making based on economic growth, a near sighted goal. In the DesJardin article, the difference between economic growth and economic development was shown. Growth is the economy getting bigger. Development is the economy getting better. These problems come back the people who have the power to elect politicians, and purchase goods, the public. A public that is uneducated and uninterested in social and environmental issues has allowed the economy to develop to this point. The solution would be to create a public that was well educated about the consequences of their actions and could think critically about their decision. This is a long term solution to a large problem. If there were policy changes without true understand of the problem by the public, that solution would not be sustainable in the future. The public would fall back into its destructive cycle of consumptions and ignorance. It has long been know that for a democracy to work correct, there must be a well-educated public to support it. With the present complexity of the problems and society the public must be more educated than ever before.

Citation Pilot, Sallie. “Companies are Embracing Corporate Responsibility in Their Annual Reports.” The Sustainable Blog, The Guardian. September 2011. []