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Corporations and Society Part I – Intro

[vc_row][vc_column][vc_column_text]Introduction

The goal of this small article series on „Corporate Sustainability“ is to provide a very condensed, easy-to-understand yet science-based introduction to the discussion about corporations and their role in society and the environment. The section is based on my research and experiences in the field of corporate sustainability. Most of the pieces are adapted parts from my Master Thesis that I wrote in 2013.

One of the reasons why I decided to study sustainability science for my Master degree were my experiences with the corporate sustainability world. One the one hand, I deeply believed (and still do) that big corporations should not be stigmatized  as merely „the evil corporates“ not caring about anything but their economic gain, but rather as the most powerful actors when it comes to inducing systemic change. On the other hand, however, when I started to work in the field, it was kind of frustrating that most of the people working in the sustainability departments had some kind of marketing or other non-sustainability background. This is not necessarily a bad thing, however, I often  missed a profound, detailed and science-based discussion of the topic. There were all kinds of different buzzwords floating around – sustainable development, integrated reporting, CSR, corporate citizenship, and so forth – but hardly anyone ever could provide satisfying explanations of what they actually mean. Thus, I decided to study Sustainability Science at Maastricht University with the goal to gain a better understanding of the field and learn how to deal with complex issues from a scientific perspective. For my Master thesis I finally did a deep dive into corporate sustainability scholarship.

[/vc_column_text][thb_gap height=“10″][vc_separator][thb_gap height=“10″][vc_column_text]Part I:  The Case for Corporate Sustainability

The discussion about corporation’s responsibility towards society is as old as economic theory itself. Already early philosophers and economists such as Adam Smith or Robert Owen in the 18th and 19th century as well as business pioneers like Henry Ford in the early 20th century recognised the importance of moral behaviour for long-term economic success.

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Adam Smith

By usually being reduced to his famous theory of the ‘invisible hand’ as a basis for modern capitalism, it is often forgotten that Adam Smith was also a profoundly ethical author. For example, in his Lectures of Jurisprudence (Smith, 1762) he argues that those merchants that follow principles of probity, honesty and punctuality will have most economic success (see p. 538) .

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Robert Owen

Moral philosopher George Owen believed that economic progress has to go along with improvements of the moral and physical well-being of workers. In Observations on the Effect of the Manufacturing System (1817), for instance, he stresses the role of governments to regulate the manufacturing system: “Hitherto, legislators have appeared to regard manufactures only in one point of view, as a source of national wealth. The other mighty consequences, which proceed from extended manufactures, when left to their natural progress, have never yet engaged the attention of any legislature” (p. 4).

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Henry Ford

Henry Ford, founder of the Ford Motor Company, was known for his idea of business as a service to society. In a conversation at a Michigan courtroom in 1917, Ford answered to an attorney’s question about the purpose of his company: “To do as much as possible for everybody concerned, to make money and use it, give employment, and send out the car where the people can use it … and incidentally make money … Business is a service, not a bonanza” (Lewis, 1976, p. 100).

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But with the industrial revolution, the humanistic idea of the honorable merchant was gradually overshadowed by increasing competitive pressure due to globalization and the opening of capital markets. The business sector started to adopt a radical focus on commercial success and with that paved the way for an economic paradigm reflected in Milton Friedman’s neo-liberalistic idea that the only responsibility of business is to increase its financial profits (Friedman, 1970).

Ever since the emergence of the concept of sustainable development and the launch of publications like The Limits to Growth by the Club of Rome in 1972 and the famous Brundtland-Report „Our Common Future“ in 1987, however, this view was put in critical condition again. Next to increasing public awareness of businesses’ role in catalyzing social issues like inequality or human rights violations (Millar, Hind & Magala, 2012), also the irreconcilability of the world’s ecological system and an economy based on a logic of unlimited growth became apparent during the last decades.

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The Limits to Growth

In 1972, the Club of Rome published The Limits to Growth report as a first attempt to raise awareness for the unforeseeable consequences of a rapidly growing world population within the limits of a resource-constraint world (Meadows et al., 1972).

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The Brundtland Report

In 1987, the WCED launched the Brundtland-Report Our Common Future and presented the hitherto most popular definition of sustainable development: to find a way of “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987, p. 43).

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In 2000, Nobel Prize winner Paul Crutzen coined the term Anthropocene to describe the emergence of an era in which the influence of human behavior on the Earth’s atmosphere and ecosystems has become so significant that it constitutes a new geological epoch (Crutzen & Stoermer, 2000). Already today the Global Foodprint Network reports that “humanity uses the equivalent of 1.6 planets to provide the resources we use and absorb our waste”. Until 2050, the world’s population is expected to increase from 6.9 to more than 9 billion – with the majority of this growth happening in urban areas of the developing and emerging world (WBCSD, 2010; PWC, 2012; FAO, 2009) and about 800 million people joining the socio-economic middle-class (WBCSD, 2010). Accordingly, the demand for consumer goods is expected to rise proportionally (PWC, 2012). As long as business-as-usual methods remain (Korhonen, 2002), higher rates of production, however, will automatically come along with a further increase of resource consumption and emissions and put even more stress on the environment (FAO; 2009; WBCSD, 2010).

Against this background, the urgency for a fundamental and disruptive change of the economic sector becomes evident. Hence, the idea of corporate sustainability (CS) as a call for corporations to regain their sense of responsibility and adopt more socially and environmentally friendly practices evolved during the last decades (Ketola, 2010; Eweje, 2011; Christofi, Christofi & Sisaye, 2012). But transforming management practice in a way that it contributes positively to sustainable development is not a trivial task, but one of the greatest and most complex challenges in sustainability (Azapagic, 2003; Khalili & Melaragno, 2011).

Notwithstanding the general acknowledgement of responsibilities beyond black bottom lines, many companies struggle with changing their business routines for the purpose of sustainability. The causes of these difficulties are diverse: Fast economic growth under a neo-liberalistic paradigm urged companies to strive for high specialization, internationalization and functional differentiation to be able to keep up with the increasing pressure of global competition. As a result, companies have developed complex, yet reductionist structures and networks of path dependencies in which it is difficult to trace and influence all impacts of a company’s actions (Korhonen, 2002). Furthermore, even if companies are eager to change their practices, they are often overwhelmed by a plethora of different concepts, guidelines and standards that need to be taken into consideration (Forbes, 2012). The consequence is that corporate sustainability strategies either lack a holistic focus or fail to meet the connection to everyday business activities (Lozano, 2010).

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Sources

Azapagic, A. (2003). Systems approach to corporate sustainability: A general management framework. Process Safety and Environmental Protection, 81(5), 303-316. doi: 10.1205/095758203770224342

Christofi, A., Christofi, P., & Sisaye, S. (2012). Corporate sustainability: Historical development and reporting practices. Management Research Review, 35(2), 157-172. doi: 10.1108/01409171211195170

Crutzen, P. J., & Stoermer, E. F.  (2000). The ‚Anthropocene‘. Global Change Newsletter, 41, 17–18.

Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times Magazine. Retrieved from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

Eweje, G. (2011). A shift in corporate practice? Facilitating sustainability strategy in companies. Corporate Social Responsibility and Environmental Management, 18, 125-136. doi: 10.1002/csr.268

Food and Agriculture Organization of the United Nations (FAO). (2009). How to feed the world in 2050. Retrieved from http://www.fao.org/fileadmin/templates/wsfs/docs/expert_paper/How_to_Feed_the_World_in_2050.pdf

Forbes (2012, January 18). The pain of sustainability. Retrieved from http://www.forbes.com/sites/csr/2012/01/18/the-pain-of-sustainability/

Ketola, T. (2010). Five leaps to corporate sustainability through a corporate reponsibility portfolio matrix. Corporate Social Responsibility and Environmental Management, 17, 320-336. doi: 10.1002/csr.219

Khalili, N. R., & Melaragno, W. (2011). Strategic tools for achieving long-term sustainability. In: N. Khalili (Ed.): Practical sustainability: From grounded theory to emerging strategies (pp. 23-56). New York: Palgrace Macmillan.

Korhonen, J. (2002). The dominant economics paradigm and corporate social responsibility. Corporate Social Responsibility and Environmental Management, 9(1), 67-80. doi: 10.1002/csr.7

Lozano, R. (2007). Orchestrating organisational changes for sustainability: Overcoming barriers to change. Greener Management International, 57, 43-64. doi: 10.9774/GLEAF.3062.2007.sp.00005

Millar, C., Hind, P., & Magala, S. (2012). Sustainability and the need for change: Organisational change and transformational vision. Journal of Organizational Change Management, 25(4), 489-500. doi: 10.1108/09534811211239272

Price Waterhouse Coopers (PWC). (2012). Water: Challenges, drivers and solution. Retrieved from http://www.pwc.com/gx/en/sustainability/publications/water-challenges-drivers-and-solutions.jhtml

World Business Council for Sustainable Development (WBCSD). (2010). Vision 2050: The new agenda for business. Retrieved from http://www.wbcsd.org/pages/edocument/edocumentdetails.aspx?id=219&nosearchcontextkey=true[/vc_column_text][/vc_column][/vc_row]