Are Business and Social Responsibility really as dichotomous as they are made out to be?
I have much to thank the business education classroom for. For not just the new things it has taught me, but also for my many views that it has either corroborated or refuted. One item on the latter list is what I am writing about here. Nobel Laureate Milton Friedman once famously said, ‘The Business of Business is Business’. There was a time I detested the man for this. To my do-gooder psyche, the thought of justifying single-minded money minting while turning a blind eye to the starving millions was preposterous at best. And so when a Professor of mine once asked me last year if I felt education should be made a free market, I found my blood boiling yet again. To me, the word free market was synonymous with heartless and cold-logic-driven monetary gluttony! Free markets were the places where the self-absorbed, sinfully rich battle it out for profits while a vast majority writhes in the agony of poverty and misery. My versions of social heroes, on the other hand, were altruistic Robin Hoods, far distanced from the arenas of the market.
A year of part-consciousness in my B school classroom has converted me on this front. While there is still a long way to go (if any) before I claim omniscience of most factors at play here, the realization that has managed to dawn on me is that my perceived contradiction was but a lack of understanding. Free markets, much like the Beast (of the Beauty and the Beast fame) ain’t really that monstrous once you start to really get to know them. I read somewhere once that Power in the world has shifted over the centuries: from the militaries to the churches to the monarchs, governments and today-the corporations. So, the writer deduced, businesses can’t shy away from their moral responsibility towards the Society.
The beauty here though lies in the fact that even if we, for a ‘cold-logic-driven’ moment, forget humanitarian arguments like these, as the greatest business leaders over the ages seem to have discovered, it actually makes sense for businesses to act in a ethical and socially responsible way. For the sake of Business! And what is known as Reputational Capital (which is nothing but general public goodwill) in managerial jargon-which most companies seek through their CSR initiatives-is just one of the reasons for this. Today’s free markets have managed to, in many ways, marshal an environment where, all other factors being the same, a company that does not sidestep its social, moral, environmental and ethical obligations is better off than one that does. Not just in the abstract and subjective sense of reputation, but also in a monetary sense.
While customer preference for green products and aversion for asocial and unethical brand names is definitely the most persuasive (if not the strongest) market force in this respect, the other stakeholders are not too far behind either. The carbon credit market presents tangible rewards for environment friendly means of production. Not-for-profit may not for long be the fashion statement it is today with self-sustaining business models for NGOs becoming the order of the day. Some mutual funds are even screening companies for social and environmental responsibility before investing. Government regulations form the eternal arm-twist that mandates responsibility. Mass media, especially the Internet, have made the ways and means of companies more transparent than ever before thereby intensifying their answerability. In some drastic cases, even stock market, to an extent, may reward or punish a company for issues like the treatment of its employees, relations with suppliers etc.
The above factors might still be bubbling under the surface, but it doesn’t seem long before they become a potent force in influencing organizational strategy. While today, as I mentioned above, for the case of two otherwise comparable companies, the one with the more benevolent image has an advantage; it may not be long before corporations discover that they can no longer afford to ignore this front. Suddenly, it does not seem far-fetched an idea to use the expressions ‘business sense’, ‘profit motive’ and ‘social responsibility’ in the same breath as it once did. Suddenly, free markets do not seem the slaughterhouses they once did. Suddenly, Mr Friedman doesn’t seem like the big bad wolf he once did!
“Corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it… because it is good for our business”
– Niall Fitzerald, Former CEO, Unilever