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corporation has only one social responsibility", management gurus
often like to say, " and that is to make money". And indeed, at the
bottom, this is unquestionably true. Or rather, at three bottoms.
For the manager with the longer view, the triple bottom lines, which
express the performance of a business not only in financial terms
but also in environmental and social ones, inevitably merge into
one: a company can only continue to be profitable as long as it
satisfies its many stakeholders investors, customers, employees
and neighbours.
Alienating any one of these
groups can, in the course of time, only be a recipe for corporate
disaster. Just as a company must make profits to survive and grow,
it must increasingly nurture and be seen to nurture also its
positive impact on social values and natures resources. So, all the
three bottom lines can be rolled into one the financial simply
by introducing an adequate time horizon. Good corporate citizenship
pays good dividends.
There will always be, no
doubt, businesses that will want to go for short term gains. But
given the general trend of public opinion and policy making, it is
going to become quite difficult in the years to come for
corporations to avoid complying with the laws of the land or lands
in which they operate without at some point jeopardizing their own
future. Some of the biggest companies in the world have disappeared
off the business map, demonstrating that a cavalier attitude, such
as that of Enron towards financial accountability, or of Union
Carbide towards environmental responsibility can result in early
corporate death. Others, such as McDonalds and Nike have had their
brushes with social issues and only time will tell whether they have
learned the lessons they will need to survive.
Hit-and-run profits are
obviously not what the management gurus are talking about. The
social responsibility of a corporation is, then, to make profits
but sustainably.
The problem is that the
world of business is driven by stock markets. And, share prices are
driven by quarterly revenue statements. What are the carrots that
would encourage managers to take the longer view and the sticks that
would deter them from taking short cuts? So far, despite the
assurances of industry leaders worldwide, there is no evidence in
practice that self-regulation can be relied upon to keep the
majority of industries on the straight and narrow.
Unquestionably, laws are
needed that make it costly for companies to be irresponsible.
Governments have the final responsibility to ensure good corporate
behaviour and they have the most effective instruments available,
both as incentives fiscal and tax breaks for doing the right thing
and as deterrents enactment and strict enforcement of liability
laws.
The real power for change, however, lies
with the citizen, each one of us. It is the indirect pressures that
we, as stakeholders, can put on the corporation that managers are
most closely tuned in to. Clearly, investors have a strong role to
play, not just on behalf of society but also in self-interest.
Studies have repeatedly shown that more responsibly managed
companies are, on the average, more profitable. Customers have an
equally crucial role to play by what they buy and which companies
they patronize. Again, self-interest can be a strong motivating
factor. And now, increasingly, civil society is demonstrating a
growing clout by organizing public pressure through advocacy, action
and public interest litigation.