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The Economic Case for Social Responsibility

16 Jun 2014 2:55 AM | Anonymous

I remember with fondness a dear friend who often said “what goes around comes around”, usually in response to something smart that I’d said to him, and his words always provoked a laugh because I knew he’d eventually exact revenge. I think his words aptly address the nature of our actions: when we do that which is good, it comes back to us and usually in greater volume than the original act, and unfortunately the reverse is also true.

Many public organizations, including the United Nations, describe social responsibility as the “Triple Bottom Line” of people, planet and profits. In other words, businesses take responsibility for the impact that their actions or products exact on the environment (planet) or their community of stakeholders (people) while maintaining their ability to be a sustainable organization (profitable). Social responsibility is always tied to ethics, or how a business operates with regard to the prescriptive of law and in the absence of it (e.g. when social values are at issue). I believe there is a perfect correlation between socially responsible companies and economically viable companies.

Milton Friedman wrote in 1970 that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits…” Although I admire and respect Friedman’s work, this was a point with which I simply could not agree. So, I conducted my own poll on Facebook, and was not surprised that 100% of the respondents disagreed with Friedman. I do not have their reasons for disagreement, but I can give you mine. Consider the view of Peter Drucker, who argued that businesses do not exist to maximize profits but to minimize costs, “costs of doing business and costs of staying in business; costs of labor and raw materials, and costs of capital; costs of today’s jobs and costs of tomorrow’s job and tomorrow’s pensions”. Just as surely as we invest in raw materials and pay wages to create products, we also invest in our people and their well-being and by extension we invest in the sustainability of our communities. This is just good business. I like the way that the founder and CEO of Whole Foods, John Mackey, expressed this thought when he said “It is the function of company leadership to develop solutions that continually work for the common good.”

Advancing social responsibility can change the world. The Micro Credit Program of The International Alliance for Women (TIAW) has followed the Grameen Foundation ideology by funding Village Banks all over the world. The women who have received micro loans through these banks have a reported 98% repayment rate. Their economic empowerment is contributing to economic expansion in their villages. Women who learn and earn are less likely to live in poverty.

There are very clear benefits of social responsibility to the business. For one, it is differentiating and can even result in preference by customers given equal prices or products from competitors. For another, it leads to an internal good will among employees that frequently ripples externally as these employees model similar behavior. It also builds a culture that is justifiably proud and recognized as doing the right thing.

Leaders, your path is clear. Do that which is in the common good, and it will come back to you.

Lisa Kaiser Hickey


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