The Challenge of Social Responsibility
Being a socially responsible corporate citizen is a complex challenge these days. "Beyond satisfying their shareholders, consumers and employees, [corporations] face a growing number of nongovernmental-organization-based watchdogs as well," writes Ethan Kapstein in Foreign Affairs magazine. "The law still compels them to maximize shareholder value, but the number of variables that could influence the bottom line seems to be increasing at an exponential rate."
Among these variables are activist shareholders, socially responsible investment funds, and nongovernmental organizations (NGOs) that pressure corporations to adopt certain labor and environmental standards. In addition, the process of globalization – which introduces a multitude of laws, economic conditions and cultural values into the equation – makes the subject of social responsibility much more complicated. From one side, corporations are pressured by NGOs and other groups to avoid practices that are viewed as exploitative from the perspective of developed nations. From the other side, companies are pressured to accommodate cultural differences.
This sometimes puts firms in an ethical bind. "Take Nike," writes Kapstein, "whose labor practices in Asia were ridiculed in Garry Trudeau's Doonesbury [comic strip]. Nike recently announced that it would no longer employ workers younger than 18 in its shoe factories, putting an end to any fears it was hiring child labor. That sounds nice, but it does little for the 17-year-old in Indonesia or Vietnam who would rather work for an American multinational than for a domestic employer." He notes that in most Asian nations, 18 is well beyond the age when compulsory education ends.
This is just one example of ethical dilemmas faced by corporations. In fact, international human resource professionals must cope with a long list of such dilemmas, according to a global ethics study from the Society for Human Resource Management. For example, among the HR professionals interviewed, some pointed out that "gift-giving" and payoffs are common means of facilitating routine business transactions in many parts of the world. Just getting phone service may require lining some local official's pocket with cash.
How do corporations cope in such a complex world? Clear corporate policies can help solve such problems in the short term, though constant communication and frequent give and take are needed over the long haul. In addition, some corporations are adopting international guidelines such as the United Nations Global Compact, which asks the world's largest companies to subscribe to nine principles in the areas of human rights, labor rights and the environment. The problem with such guidelines, Kapstein suggests, is that they can be too abstract to accommodate the tradeoffs and dilemmas that corporations face under specific circumstances. He argues that international organizations might make an even greater contribution by "evaluating proposed changes in labor and environmental standards according to their costs, benefits, and likely distribution of winners and losers, because few sources of impartial information are currently available for guiding global discussions." Such information might help corporations make tough decisions in a complex world.
Another response is to adopt a business paradigm that guides business ethics as well as other forms of strategic decision-making. DuPont, for example, has gravitated toward the concept of sustainable growth – that is, achieving business growth even while shrinking the negative environmental impact of such growth. In Harvard Business Review, chairman and CEO Chad Holliday recently wrote, "If one is looking for a new definition of corporate responsibility, sustainable growth is it, and it is directly related to business self-interest." He argues that DuPont can leverage creativity and scientific knowledge in order to grow its businesses even while "meeting the human needs of societies around the world and reducing the environmental footprint of our operations and products." This vision affects everything from the way DuPont runs its production lines and addresses worker safety to the way it sets up new businesses in developing nations. In short, DuPont is trying to integrate social responsibility and shareholder value creation into a seamless whole, using a paradigm that it hopes will give it a major competitive advantage well into the 21st century.
====================================================
For a summary of the Chad Holliday article on DuPont, see
http://www.hbsp.harvard.edu/products/hbr/sep01/R0108J.html
For more on the U.N.'s Global Compact, see
http://www.unglobalcompact.org/
To read the first few paragraphs of the Ethan Kapstein article, see
http://www.foreignaffairs.org/Search/document.asp?i=20010901FAESSAY5573.XML
Among these variables are activist shareholders, socially responsible investment funds, and nongovernmental organizations (NGOs) that pressure corporations to adopt certain labor and environmental standards. In addition, the process of globalization – which introduces a multitude of laws, economic conditions and cultural values into the equation – makes the subject of social responsibility much more complicated. From one side, corporations are pressured by NGOs and other groups to avoid practices that are viewed as exploitative from the perspective of developed nations. From the other side, companies are pressured to accommodate cultural differences.
This sometimes puts firms in an ethical bind. "Take Nike," writes Kapstein, "whose labor practices in Asia were ridiculed in Garry Trudeau's Doonesbury [comic strip]. Nike recently announced that it would no longer employ workers younger than 18 in its shoe factories, putting an end to any fears it was hiring child labor. That sounds nice, but it does little for the 17-year-old in Indonesia or Vietnam who would rather work for an American multinational than for a domestic employer." He notes that in most Asian nations, 18 is well beyond the age when compulsory education ends.
This is just one example of ethical dilemmas faced by corporations. In fact, international human resource professionals must cope with a long list of such dilemmas, according to a global ethics study from the Society for Human Resource Management. For example, among the HR professionals interviewed, some pointed out that "gift-giving" and payoffs are common means of facilitating routine business transactions in many parts of the world. Just getting phone service may require lining some local official's pocket with cash.
How do corporations cope in such a complex world? Clear corporate policies can help solve such problems in the short term, though constant communication and frequent give and take are needed over the long haul. In addition, some corporations are adopting international guidelines such as the United Nations Global Compact, which asks the world's largest companies to subscribe to nine principles in the areas of human rights, labor rights and the environment. The problem with such guidelines, Kapstein suggests, is that they can be too abstract to accommodate the tradeoffs and dilemmas that corporations face under specific circumstances. He argues that international organizations might make an even greater contribution by "evaluating proposed changes in labor and environmental standards according to their costs, benefits, and likely distribution of winners and losers, because few sources of impartial information are currently available for guiding global discussions." Such information might help corporations make tough decisions in a complex world.
Another response is to adopt a business paradigm that guides business ethics as well as other forms of strategic decision-making. DuPont, for example, has gravitated toward the concept of sustainable growth – that is, achieving business growth even while shrinking the negative environmental impact of such growth. In Harvard Business Review, chairman and CEO Chad Holliday recently wrote, "If one is looking for a new definition of corporate responsibility, sustainable growth is it, and it is directly related to business self-interest." He argues that DuPont can leverage creativity and scientific knowledge in order to grow its businesses even while "meeting the human needs of societies around the world and reducing the environmental footprint of our operations and products." This vision affects everything from the way DuPont runs its production lines and addresses worker safety to the way it sets up new businesses in developing nations. In short, DuPont is trying to integrate social responsibility and shareholder value creation into a seamless whole, using a paradigm that it hopes will give it a major competitive advantage well into the 21st century.
====================================================
For a summary of the Chad Holliday article on DuPont, see
http://www.hbsp.harvard.edu/products/hbr/sep01/R0108J.html
For more on the U.N.'s Global Compact, see
http://www.unglobalcompact.org/
To read the first few paragraphs of the Ethan Kapstein article, see
http://www.foreignaffairs.org/Search/document.asp?i=20010901FAESSAY5573.XML