Part 1
(Retrieved from http://www.trueimpact.com/blog/bid/70119/Measuring-Corporate-Citizenship-Does-CSR-Enhance-Performance )
Researchers from Harvard Business School analyzed 180 companies in terms of their environmental and social policies (perceived environmental friendliness, employee fairness, community investments and locally sourced products) and found that companies that had more sustainable policies performed better on the stock market and accounting. And here I propose three theories that can possibly explain this phenomenon.
Firstly I would propose that the consumers are the ones most responsible for the more sustainable companies' better performance. As sustainability has been brought to spotlight in recent years, the social awareness towards it has grown. The social activism on sustainability may also be slowly having an effect on the decision making process of consumers. Also, as the GDP grew, people have more buying power to choose the goods and services they want. Such decisions are not only based on the quantity but on the quality of the product. People would think that they are making a contribution to sustainability if they are buying “green” products. Thanks to the “green-washing” advertisement, it is commonly believed that “green” products are better for their well-being. Therefore, a company with a good sustainable image can be very attractive to consumers, hence their better performance on the market.
Second of all, when a company invests more to the local community and pays more attention to its employee’s welfare, it is not hard to expect some appreciation in return. Employees will be more productive and the local community will be more supportive which could add up to big increase in the productivity of the company.
Last but not least, operating in a sustainable way has benefits on its own. For example, using local sources could reduce the transportation fee comparing to using distant sources. Using organic fertilizer does less harm to the soil and therefore reduce the cost of finding new agricultural sites in the long term.
Overall, it is very encouraging to see that companies that pay more attention to people and planet get more profit in return. It sets good examples for both existing and new businesses hence could start a good cycle, which is crucial to build a sustainable society.
Part 2
“The business of business is to increase its profit”(Friedman, 1970). First reading these words inspired an image of a soulless mega-rich businessman whose only pursuit in life is money regardless of their businesses' harmful effect to the society. However such image may not be the most accurate depiction of this statement. After all, businesses do exist in a very realistic world and the pursuit for profit is not just greedy but actually essential to its survival.
I understand the word “business” as organizations that provide certain goods and services to the public and get profits to sustain themselves in return. Therefore profit is what keeps it going. Or to elaborate using evolutionary principles, “survival of the fittest”. The ability to get profit is the advantageous “gene” that enable the organism to be competitive enough to survive and to multiply in its environment. A business that is unable to make profit will be eliminated in the natural process, let alone to worry about any “social responsibilities”.
Besides, Friedman’s paper has made the point sufficiently that “social responsibility” is irrelevant to any corporate but to individuals. When facing the executive choice of either profits or social benefits, a businessman must act as an agent of the business but not a simple social person because of his prime responsibilities to the business, the stakeholder’s money and the employees. Our social system has different divisions that take care of different matters. And it is neither the business’s imperative nor capability to strive for the development of social justice.
Admittedly, it is certainly great for an entrepreneur to have a goal to contribute to societal good through his business. However this arrangement happened when he was forming ideas of what services or goods he is providing the public that can be beneficial to civil rights or the environment or whatever that represents “good” to him. Once the business is established, as Friedman suggested, his most important responsibilities now are for the stakeholders and employees. And when the goal and his responsibilities ever came in conflict, he should put his imperative responsibilities first, as hard as that may be.
I actually have personal experience that can better elaborate the point. I worked for an entrepreneur who started a business of red worm composting. He took the food waste from the town and compost them to great fertilizers. At first it seemed to be a win-win situation in terms of both profits (he is taking waste to generate profit) and sustainability (it's waste management and the fertilizer produced are organic).
However, as the business grew bigger, the conflict between profit and sustainability arose. To make more profit, he needed more vegan food waste and the ways of achieving that did potential harm to multiple other social factors. For example, the food waste used to all go to a local pig farmer, after all the vegan food waste were taken to make fertilizers, the pigs only ate meat and dairy which made them sick. Also, as local food waste was not enough to keep up with production, he started transporting food waste from other towns, which introduced a larger energy footprint. It was becoming debatable if the business was indeed contributing to sustainability. However, the business owner had his, his employees and the investor’s profit on his shoulders so the concerns for the pigs’ health and the increased energy footprint had to yield to the risk of shutting down his business. It did bother his morals and personal passion for sustainability, however, he thought only if the business can still survive on profits, could he come up with better ways to operate and improve its contribution to sustainability. It was not an easy decision to make, but he eventually chose to keep his business going. Considering his initial goal of doing good to the environment, what he had to do to keep the business is sad but understandable.
Business concerns people’s live-hood and only its existence can provide possible opportunities for social improvement due to either government regulation, social pressure, or the business owners’ sense of responsibility. And in the end, the existence of a business only depends on if it is making enough profits. So yes, “the business of business is to increase its profit”. The business owner's noble passion for social good should be achieved in a profitable way.
