On Attitudes to Business

An article in last week’s Economist spotlights a recent survey conducted by global public relations firm, Edelman, that looks at differing attitudes to companies’ role in society by asking a sample of informed respondents whether they agree with Milton Friedman’s famous quote, “the social responsibility of business is to increase its profits.” The survey is a useful contribution to the field, to the extent that it illuminates cultural differences in attitudes to business; and as the Economist notes, the relative positions of Sweden and the U.S. do indeed warrant a raised eyebrow.

However, like many surveys of this type, the question is based on an assumption that explicitly pursuing social benefit must come at a cost to the company – a premise reinforced by the article itself, which summarises Friedman’s quote as exhorting companies to “forget CSR, make money.” At FSG, we would disagree with that assumption. Rather, companies have an opportunity to both engage in what the Economist calls “corporate do-gooding” and increase their competitiveness at the same time, by creating shared value.

There are countless examples of companies from around the world doing this. A good one, with solid numbers behind it, is Dow Chemical’s efforts to reduce its greenhouse gas emissions. The oppositional way of thinking about CSR that is implied in the article, would dismiss emissions as an “externality” or cost on the business; either to be ignored in the pursuit of profits or to be addressed anyway, despite the extra cost, in a sort of atonement for the company’s intrinsic badness. In real life, though, the company drastically reduced its carbon footprint, and saved a whopping $9bn in the process. By contrast, due to the costs of the disastrous Gulf of Mexico oil spill, last Tuesday BP announced a $3.7bn loss – the company’s management may well have forgotten CSR, but that hasn’t proven to be a particularly successful way of making money.

Nor are such examples limited to avoiding unpleasant side-effects. India’s rapidly expanding Jain Irrigation is making money while transforming the productivity and water efficiency of poor farmers through its cost-effective drip irrigation technology. Toyota’s Technical Education Program, through which it is training mechanics in 23 European countries, makes an important contribution to economic development and job creation in disadvantaged communities. It also reinforces the company’s competitive position, a point underlined by the fact that the company’s vehicles yet again dominated the UK’s J.D. Power/What Car? Vehicle Ownership Satisfaction Survey, in which service satisfaction is a key criterion.

Of course, the perception of business’ role in society matters: it is a key influence on how regulators approach their work, and therefore vital information for companies that operate in those locations. However, it would be interesting to see the extent to which the informed public surveyed by Edelman agrees with the statement “The social responsibility of business is to increase its profits while simultaneously creating value for society as a whole.” They’d have at least one vote right here.

UPDATE 22nd February: it turns out that Edelman did indeed ask a similar question to this, with interesting results: see slide 19 of this presentation

(Hat tip: Will Straw at the Guardian)

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