Timmerman 1

Lesley Timmerman

Professor Jennifer Wilson

English 102

15 August 2016

An Argument for Corporate Responsibility

Opponents of corporate social responsibility (CSR) argue that a company’s sole duty is to generate profits. According to them, by acting for the public good, corporations are neglecting their primary obligation to make money. However, as people are becoming more and more conscious of corporate impacts on society and the environment, separating profits from company practices and ethics does not make sense. Employees want to work for institutions that share their values, and consumers want to buy products from companies that are making an impact and improving people’s lives. Furthermore, businesses exist in an interdependent world where the health of the environment and the well-being of society really do matter. For these reasons, corporations have to take responsibility for their actions, beyond making money for shareholders. For their own benefit as well as the public’s, companies must strive to be socially responsible.

In his article “The Case against Corporate Social Responsibility,” Wall Street Journal writer Aneel Karnani argues that CSR will never be able to solve the world’s problems. Thinking it can, Karnani says, is a dangerous illusion. He recommends that instead of expecting corporate managers to act in the public interest, we should rely on philanthropy and government regulation. Karnani maintains that “Managers who sacrifice profit for the common good [. . .] are in effect imposing a tax on their shareholders and arbitrarily deciding how that money should be spent.” In other words, according to Karnani, corporations should not be determining what constitutes socially responsible behavior; individual donors and the government should. Certainly, individuals should continue to make charitable gifts, and governments should maintain laws and regulations to protect the public interest. However, Karnani’s reasoning for why corporations should be exempt from social responsibility is flawed. With very few exceptions, corporations’ socially responsible actions are not arbitrary and do not sacrifice long-term profits.

Timmerman 2

In fact, corporations have already proven that they can contribute profitably and meaningfully to solving significant global problems by integrating CSR into their standard practices and long-term visions. Rather than focusing on shareholders’ short-term profits, many companies have begun measuring their success by “profit, planet and people” — what is known as the “triple bottom line.” Businesses operating under this principle consider their environmental and social impacts, as well as their financial impacts, and make responsible and compassionate decisions. For example, such businesses use resources efficiently, create healthy products, choose suppliers who share their ethics, and improve economic opportunities for people in the communities they serve. By doing so, companies often save money. They also contribute to the sustainability of life on earth and ensure the sustainability of their own businesses. In their book The Triple Bottom Line: How Today’s Best-Run Companies Are Achieving Economic, Social, and Environmental Success, coauthors Savitz and Weber demonstrate that corporations need to become sustainable, in all ways. They argue that “the only way to succeed in today’s interdependent world is to embrace sustainability” (xi). The authors go on to show that, for the vast majority of companies, a broad commitment to sustainability enhances profitability (Savitz and Weber 39).

For example, PepsiCo has been able to meet the financial expectations of its shareholders while demonstrating its commitment to the triple bottom line. In addition to donating over $16 million to help victims of natural disasters, Pepsi has woven concerns for people and for the planet into its company practices and culture (Bejou 4). For instance, because of a recent water shortage in an area of India where Pepsi runs a plant, the company began a project to build community wells (Savitz and Weber 160). Though Pepsi did not cause the water shortage nor was its manufacturing threatened by it, “Pepsi realizes that the well-being of the community is part of the company’s responsibility” (Savitz and Weber 161). Ultimately, Pepsi chose to look beyond the goal of maximizing short-term profits. By doing so, the company improved its relationship with this Indian community, improved people’s daily lives and opportunities, and improved its own reputation. In other words, Pepsi embraced CSR and ensured a more sustainable future for everyone involved.

Timmerman 3

Another example of a wide-reaching company that is working toward greater sustainability on all fronts is Walmart. The corporation has issued a CSR policy that includes three ambitious goals: “to be fully supplied by renewable energy, to create zero waste and to sell products that sustain people and the environment” (“From Fringe to Mainstream”). As Dr. Doug Guthrie, dean of George Washington University’s School of Business, noted in a recent lecture, if a company as powerful as Walmart were to succeed in these goals, the impact would be huge. To illustrate Walmart’s potential influence, Dr. Guthrie pointed out that the corporation’s exports from China to the United States are equal to Mexico’s total exports to the United States. In committing to CSR, the company’s leaders are acknowledging how much their power depends on the earth’s natural resources, as well as the communities who produce, distribute, sell, and purchase Walmart’s products. The company is also well aware that achieving its goals will “ultimately save the company a great deal of money” (“From Fringe to Mainstream”). For good reason, Walmart, like other companies around the world, is choosing to act in everyone’s best interest.

Recent research on employees’ and consumers’ social consciousness offers companies further reason to take corporate responsibility seriously. For example, studies show that workers care about making a difference (Meister). In many cases, workers would even take a pay cut to work for a more responsible, sustainable company. In fact, 45% of workers said they would take a 15% reduction in pay “for a job that makes a social or environmental impact” (Meister). Even more said they would take a 15% cut in pay to work for a company with values that match their own (Meister). The numbers are most significant among Millennials (those born between, approximately, 1980 and the early 2000s). Fully 80% of Millennials said they “wanted to work for a company that cares about how it impacts and contributes to society,” and over half said they would not work for an “irresponsible company” (Meister). Given this more socially conscious generation, companies are going to find it harder and harder to ignore CSR. To recruit and retain employees, employers will need to earn the admiration, respect, and loyalty of their workers by becoming “good corporate citizen[s]” (qtd. in “From Fringe to Mainstream”).

Timmerman 4

Similarly, studies clearly show that CSR matters to today’s consumers. According to an independent report, 80% of Americans say they would switch brands to support a social cause (Cone Communications 6). Fully 88% say they approve of companies’ using social or environmental issues in their marketing (Cone Communications 5). And 83% say they “wish more of the products, services and retailers would support causes” (Cone Communications 5). Other independent surveys corroborate these results, confirming that today’s customers, especially Millennials, care about more than just price (“From Fringe to Mainstream”). Furthermore, plenty of companies have seen what happens when they assume that consumers do not care about CSR. For example, in 1997, when Nike customers discovered that their shoes were manufactured by child laborers in Indonesia, the company took a huge financial hit (Guthrie). Today, Information Age customers are even more likely to educate themselves about companies’ labor practices and environmental records. Smart corporations will listen to consumer preferences, provide transparency, and commit to integrating CSR into their long-term business plans.

In this increasingly interdependent world, the case against CSR is becoming more and more difficult to defend. Exempting corporations and relying on government to be the world’s conscience does not make good social, environmental, or economic sense. Contributors to a recent article in the online journal Knowledge@Wharton, published by the Wharton School of Business, agree. Professor Eric Orts maintains that “it is an outmoded view to say that one must rely only on the government and regulation to police business responsibilities. What we need is re-conception of what the purpose of business is” (qtd. in “From Fringe to Mainstream”). The question is, what should the purpose of a business be in today’s world? Professor of Business Administration David Bejou of Elizabeth City State University has a thoughtful and sensible answer to that question. He writes,

Timmerman 5

. . . it is clear that the sole purpose of a business is not merely that of generating profits for its owners. Instead, because compassion provides the necessary equilibrium between a company’s purpose and the needs of its communities, it should be the new philosophy of business. (Bejou 1)

As Bejou implies, the days of allowing corporations to act in their own financial self-interest with little or no regard for their effects on others are over. None of us can afford such a narrow view of business. The world is far too interconnected. A seemingly small corporate decision — to buy coffee beans directly from local growers or to install solar panels — can affect the lives and livelihoods of many people and determine the environmental health of whole regions. A business, just like a government or an individual, therefore has an ethical responsibility to act with compassion for the public good.

Fortunately, corporations have many incentives to act responsibly. Customer loyalty, employee satisfaction, overall cost-saving, and long-term viability are just some of the advantages businesses can expect to gain by embracing comprehensive CSR policies. Meanwhile, companies have very little to lose by embracing a socially conscious view. These days, compassion is profitable. Corporations would be wise to recognize the enormous power, opportunity, and responsibility they have to effect positive change.

Timmerman 6

Works Cited

Bejou, David. “Compassion as the New Philosophy of Business.” Journal of Relationship Marketing, vol. 10, no. 1, Apr. 2011, pp. 1-6. Taylor and Francis, doi:10.1080/15332667.2011.550098.

Cone Communications. 2010 Cone Cause Evolution Study. Cone, 2010, www.conecomm.com/research-blog/2010-cause-evolution-study.

“From Fringe to Mainstream: Companies Integrate CSR Initiatives into Everyday Business.” Knowledge@Wharton, 23 May 2012, knowledge.wharton.upenn.edu/article/from-fringe-to-mainstream-companies-integrate-csr-initiatives-into-everyday-business/.

Guthrie, Doug. “Corporate Social Responsibility: A State Department Approach.” Promoting a Comprehensive Approach to Corporate Social Responsibility (CSR), George P. Shultz National Foreign Affairs Training Center, 22 May 2012. YouTube, 23 Aug. 2013, www.youtube.com/watch?v=99cJMe6wERc.

Karnani, Aneel. “The Case against Corporate Social Responsibility.” Wall Street Journal, 14 June 2012, www.wsj.com/articles/SB10001424052748703338004575230112664504890.

Meister, Jeanne. “Corporate Social Responsibility: A Lever for Employee Attraction & Engagement.” Forbes, 7 June 2012, www.forbes.com/sites/jeannemeister/2012/06/07/corporate-social-responsibility-a-lever-for-employee-attraction-engagement/#6125425a7511.

Savitz, Andrew W., with Karl Weber. The Triple Bottom Line: How Today’s Best-Run Companies Are Achieving Economic, Social, and Environmental Success, Jossey-Bass, 2006.