Are companies capable of developing a social-environmental conscience?

Maybe

Asking such a question would likely have been unthinkable decades ago.  Instead the economist Milton Friedman’s famous essay, “The Social Responsibility of Business is to Increase its Profits,” ruled the boardrooms of corporations and the conversations about the issue.  The prevailing view was that a free market delivered the best goods and services to the public, and created the most wealth for shareholders, who could use their earnings on anything they wanted, including social “causes.”

Today it is a more open question, with an emerging view based on applying “environmental, social and governance” (ESG) criteria to decisions on how to allocate financial investment or apply a business’ resources.

Social issues revolving around race have, of course, become relevant over the past number of decades because of equal rights laws and constitutional equal protections in the US and elsewhere.  Protections against discrimination based on gender have spread widely in many countries.  Local laws in the US that have impinged on these gender protections have generated firm opposition and social action by businesses that refuse to hold conventions or meetings or special programs where such discriminatory local laws have passed.  And individuals have been applying pressure to companies that do not protest such discriminatory laws.

Recently we have seen businesses publically supporting gun control laws in the US, with companies like Walmart adopting policies to not sell certain guns and ammunition.  The CEO of Walmart stated that the company was adopting this policy because of the “the outcry he heard from scores of Americans, calling on him to use his leverage as the leader of the country’s largest retailer to create a model for more responsible gun-selling practices.”  See Sorkin, below.  Of course, it should be noted that one of the recent mass shootings in the US was at a Walmart store in Texas where 22 people were killed.

The other side of this coin reflects the reality that public pressure can work against progressive policies, as when the citizens of some states pressure a local government to allow citizens to carry guns openly in public, including in schools.

Despite the lack of hard, affirmative laws requiring climate action, there are increasing pressures from groups and individual citizens and consumers on companies to acknowledge the serious risks from climate breakdown and to adopt polices and practices that reflect those concerns.

 

 

The recent and on-going public protests by youth groups are reinforcing and broadening these efforts.

And companies have responded by supporting climate actions and policies.  For example, 25 large American companies campaigned against America’s withdrawal from the Paris climate agreement in 2017, and 232 firms worth trillions of dollars have committed to cut carbon emissions in line with the Paris agreement.

The broad corporate support for a shift from fossil fuels to renewable energies is perhaps the clearest expression of this development.  While that shift is encouraging, it has to be recognised that the companies involved are not those in the fossil fuel business, or those dependent on this sector.  Typically the progressive companies are those that sell products or services to the public, which makes them more amenable to public influence and protests.

It also can be noted that the companies supporting climate action, and particularly development of renewable energies, are acting in their self-interests as they recognize the scientific hand-writing on the wall:  the future rests on renewable energy, not fossil fuels.  The companies that adjust to that reality will be more financially secure than those who resist the changing landscape of energy sources.

 

Sources:

Andrew Ross Sorkin, “Walmart’s C.E.O. Steps Into the Gun Debate. Other C.E.O.s Should Follow,” The New York Times ( 5 Sept. 2019). nyti.ms/2lyjosx

Andrew Ross Sorkin, “Profits or Public Interests?” The New York Times (19 Sept. 2019). nyti.ms/2mrVyz7

“I’m from a company, and I’m here to help:  The idea that companies with a sense of purpose could tackle social injustice, climate change and inequality is sweeping through parts of the business world,” The Economist (24 August 2019).

Mark Miller, “Bit by Bit, Socially Conscious Investors Are Influencing 401(k)’s,” The New York Times (29 Sept 2019).   nyti.ms/2niQL3T

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