By Edward D. Hess,
Distinguished Executive in Residence and
Adjunct Professor of Management, Goizueta Graduate School of Business
I have written several commentaries for Catalyst over the past two years on the issue of leadership – and my conviction that leadership is at the heart of building any high performance organization. And that values and character are the heart and soul of leadership.
Enron, Andersen, Worldcom, and HealthSouth have been followed by Parmalat, Shell Oil, KPMG Tax Shelters II, etc. No, it is not a few bad apples. It is systemic – caused in large part by putting human beings under immense pressure based upon an unrealistic assumption that businesses can and should grow every three months. This pressure for growth has led to significant cost reduction pressures for the cheapest labor, cheapest capital, and cheapest places to do business wherever in the world, no matter the personal, social, or environmental consequences.
Is it no wonder that the Academy of Management Executives Journal in a May 2004 article (p134) reported that 71% of the American public believes that none, very few, or only some businesses operate in an honest manner. Who are the American public? Your and my customers, partners, employees, friends, etc.
Like most things in life or history, events and trends go in cycles until there is a countervailing movement. And that is what I want to talk about in this commentary – to alert you to a growing countervailing movement that will impact many businesses. Every business that is a supplier, partner, or customer of a global or non-U.S. based business will be impacted.
This movement asks hard questions:
- Are there limits on what a business should do to make profits?
- Do businesses have social and environmental responsibilities in addition to making a profit?
- Are businesses held to a societal duty of stewardship?
These questions are being fueled by a strong international environmental stewardship movement, the sustainable development movement, and the humanitarian movement – all of which are worldwide, strong, and vocal. These movements are led by NGOs, non-governmental organizations, and private foundations.
And we have seen different businesses and governmental responses to these countervailing pressures. In England, the movement is quite strong and is becoming not only NGO led but government led and is now part of some business school research centers. In Europe, historically their capitalist systems have both governmental and labor checks and balances on business which have both prevented and protected against unfettered laissez-faire market capitalization. And in Asia, the underlying Eastern philosophies and strong government controls, too, have placed limits on capitalism.
In the U.S. we have seen Nike, Intel, Starbucks, Wal-Mart and others having to confront and deal with the impact their businesses are having on local communities and whether their businesses have duties to enforce child labor and/or environmental standards or development standards in different regions of the world.
In response to the Corporate Social Responsibility movement, Fortune 500 corporations have formed and funded the Business For Social Responsibility (bsr.org) and there are a number of recent books on the topic including Moral Capitalism by William Kreider; What Matters Most by Jeffrey Hollander; and Value Shift by Professor Lynn S. Paine @ Harvard Business School.
The debate is whether a corporation has any duties to society and to the environment. Or putting it another way – is how you make your money important? On one hand, you have those who argue that corporations have only one duty – to create shareholder value. Implied is that it is okay to do anything necessary to generate profits except break the law. On the other hand, the corporate social responsibility movement argues that corporation should take into account its external costs or impacts on the environment, human rights, etc.
Do not dismiss those debates or trends. They are not limited to liberals or to a radical few, or to think tanks. This movement has fundamentally affected how big global companies do business and how they have had to change business practices. Nike, Starbucks, Intel, Shell Oil. British Petroleum are a few.
Look at the companies speaking in New York City at the Annual Businesses for Social Responsibility Conferences: in November: BP, Newmont Mining Corporation, Whirlpool, Pfizer, Hewlett Packard, General Motors, Cisco, Xerox, The Gap, DaimlerChrysler Corporation, Sony, McDonalds, and Coca Cola.
And this movement is:
1) Going to go both up and down the supply chain of these companies and others;
2) Going to affect customers perceptions of brands; and is
3) Going to push all businesses to be aware of the impacts of what they do.
To further bring home the strength of what is going on out there, let me quote from British Petroleum’s August 2002 Business Policies as found on its website – BP.com.
“WHAT WE STAND FOR: A GOOD BUSINESS SHOULD BE BOTH COMPETITIVELY SUCCESSFUL AND A FORCE FOR GOOD. AT THE CORE OF BP IS AN INSTITUTIONAL COMMITMENT TO HUMAN PROGRESS.”
_ _ _ _ _ “WE BELIEVE THIS FREEDOM IS INSEPARABLE FROM THE RESPONSIBILITY TO PRODUCE AND TO DISTRIBUTE OUR PRODUCT IN WAYS THAT RESPECT BOTH HUMAN RIGHTS AND NATURAL ENVIRONMENTS.”
IN HIS AUGUST 2002 LETTER TO EMPLOYEES BP CEO LORD BROWNE STATED,
“OUR AIM IS TO DO NO DAMAGE – TO PEOPLE OR TO THE ENVIRONMENT.”
“BP IS NOW ONE OF THE LARGEST COMPANIES IN THE WORLD WHICH MEANS THAT WE MUST EXERCISE ANY POWER WE HAVE WITH THE GREATEST CARE.”
And then BP sets forth its detail policies on ethical conduct, employees, relationships (suppliers and customers and practices) health, safety, environmental performance, and controls and finance. BP further states:
“THE PROMOTION AND PROTECTION OF ALL HUMAN RIGHTS IS A LEGITIMATE CONCERN OF BUSINESS. WE WILL EXPECT THE SAME COMMITMENT FROM THIRD PARTIES ACTING IN BP’S BEHALF.”“WITH PARTNERS, CONTRACTORS, AND SUPPLIERS, WE WILL SEEK PARTNERS WHOSE POLICIES ARE CONSISTENT WITH OUR OWN.”
“WE WILL MAKE OUR CONTRACTORS AND SUPPLIERS AWARE OF OUR COMMITMENTS AND EXPECTATIONS AND OF THEIR RESPONSIBILITIES IN IMPLEMENTING THEM.”
Go to BP.com and download the business policies and read them. Think about them. Think about your business – your brand – what you stand for – will this impact you?
YES. Customers care, and employees care. How you conduct your business will impact your employee productivity and retention which impacts your financial performance. And maybe you should care because it is the right thing to do.
What responsibilities does your business have?