A business’s only responsibility is to produce profit. To what extent do you agree with this statement?
The late Milton Friedman, a venerated American economist, promoted the idea that businesses only had one responsibility, and that was to maximize returns to its shareholders (Friedman 1962). This line of thinking has gathered a significant amount of attention and debate as some elements of society move on to a more conscientious and careful worldview where issues such as sustainability and responsibility are, or should be prioritized. The purpose of this paper is to take an in depth look at Corporate Social Responsibility (CSR). This can be described as: a concept that challenges the conventionally-held belief that the sole purpose of a business is to create profit.
Proponents of CSR put forward the case that the role of businesses must go beyond increasing their own profit margins: they must contribute to causes such as human rights, the environment and animal welfare – or at the very least, take strong measures to do no harm in these areas. The term “corporate social responsibility” emerged in the 1960s, and in recent years, there has been an upsurge in this phenomenon with an outpouring of CSR programs and reports. This can be witnessed in large-scale corporations such as McDonalds and Nike, but also among smaller companies that are just starting out (Crane 2008). For example, one can consider the rise of “social entrepreneurship”.
Governments have also begun encouraging CSR practices and Non-Government Organisations (NGOs), actively work to elevate standards of ethics and hold firms accountable through strategic partnerships (Crane 2008). However, because CSR is a relatively new concept in terms of popularity, it has also been a matter of debate. There are people within the business community, as well as in academia and the general public, who feel that CSR makes unrealistic or misplaced demands on businesses. They might ask the following question: “Do firms have social responsibilities in the first place?” (Crane 2008, 5). This essay seeks to answer this question through an examination of both sides of the argument.
While CSR is a growing practice which is becoming more deeply embedded within some of the most powerful corporate structures, there are still many companies (both large and small) that have not followed suit. There are many companies which have not taken any measures to demonstrate that they care about social or environmental causes. Furthermore, there are companies which have made vague commitments to CSR, yet carry out their policies half-heartedly, or lack transparency in their efforts. The main reason for this resistance toward CSR is that these companies believe first and foremost in the pursuit of profit. As American economist Milton Friedman writes in his book Capitalism and Freedom, “there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” According to his reasoning, to be socially responsible means simply to “[engage] in open and free competition without deception or fraud.” Indeed, those who oppose the CSR model do not imagine a world without any laws governing their practices, they simply do not see their obligations toward society going beyond that (Friedman 1970). This means that humanitarian and environmental concerns go unaddressed by some businesses, with opponents of CSR actually believing that this non-obligatory outlook is better for society since governments and NGOs maybe better suited to address those issues.
I believe that businesses should still be wholly committed to social responsibility, and that “social responsibility” goes beyond turning a profit within the boundaries of law. The truth of the matter is that “legal” is not always synonymous with “ethical” – a company could be obey all the rules of law yet still be acting in a morally indefensible way (Balderlomar 2016).
Furthermore, international laws prohibiting human rights violations can be considered ineffectual due to the difficulty of enforcement, and as a result, are not usually encompassed in what a company considers to be “the rules of the game” as Friedman would put it. Child labor is a good example of this dilemma. To that end, corporations must conduct their operations through a lens of ethics rather than law alone.
There is also an economic benefit to CSR practices – they enhance the company’s image, increase public confidence, and encourage more consumption. This is especially important in light of the trend of “ethical consumerism”. For example, Starbucks is an extremely successful world-renowned business which boasts a brand built on being socially conscious and sustainable. On their website’s “Responsibility” section, under Recycling and Sustainability, they write: “We know this is important to our customers, to us and our planet. In fact, we get more customer comments about recycling, particularly our cups, than almost any other environmental issue” (Starbucks Website 2017). Making their cups recyclable and providing recycling bins in stores keeps their customers happy, and therefore, turns a higher profit. To illustrate this point, a 2015 study indicates that 84 percent of global consumers state they seek out responsible products whenever possible (Cone Communications/Ebiquity Global CSR Study 2015). This demonstrates how CSR and profits are not mutually exclusive, but mutually reinforcing.
In regard to the argument that corporations have no business in creating societal change, one needs only to consider the wonderful contributions made by businesses in the areas of humanitarianism and environmentalism. These measures can succeed through collaboration with governments, NGOs and community leaders, and by hiring specialists or consultants.
In conclusion, I want to emphasize although businesses will almost always be motivated by generating revenue, they also have social responsibilities. As corporations play larger and more substantial roles in our society (for example, influencing politics and media), their character as “social” entities becomes more evident, and their social responsibility becomes greater. Ethics should be the focus as opposed to simply adhering to only the most enforceable laws. As Anita Roddeck, founder of the Body Shop, said: “The business of business should not be about money. It should be about responsibility. It should be about public good, not private greed.” A more compelling argument for business owners concerned about how CSR will affect their bottom line, is considering this quote from Peter Robinson, CEO of Mountain Equipment Co-op: “Ethics is the new competitive environment.”
Consumers increasingly care about where their products come from, how they are made, how big the company’s carbon footprint is, and what the company is doing to solve the world’s greatest problems. Perhaps this sounds like a tall order. But corporations worldwide are doing their best, and not only are these ethical businesses seeing large profits, they are also truly making a difference.