INTRODUCTIONAs management students we often hear of many concepts and practices that have been landmarks of the way business is conducted by the worlds most powerful and influential organizations. Between theories of cost effectiveness analysis or process integration, we are told that business are similar to living organisms in that they change and interact with the rest of society.
This assertion has many effects on the way we look at them and how we define what their purpose should be. From a purely economic standpoint, businesses are there to make money. From a social perspective, many in the business world argue that organizations produce certain goods such as employment opportunities that translate into improved living conditions for all those connected to this mechanism.
Furthermore, as the sphere of influence of business has grown in the last decades, so too have the debates over the limits of their interactions with the rest of society.
Loud calls have been made by many parties to monitor with increased scrutiny, the social contributions of companies. Among the main argument for such a position is the belief that organizations have run above caring for societyÃÂs best interest. By beingÃÂfor much too longÃÂheld accountable to only the economic performances of their firms, leaders of industries have elected to steer their organizations clear of meeting any social objectives aligned with the communal best interest.
But there currently is a change in perspective regarding the approach to business and social responsibility. The more careful analysis of businesses and their role in building the societies have led to a shift in perception and the now popular understanding that just as we citizens are required to be accountable for the consequencesÃÂeven those unforeseenÃÂof our decisions, organizations must conduct their affairs in the manner which are aligned with the greater good.
While some in the business world initially rejected that position; stating that by focusing on anything more than the financial performance aspects would be a sure fire way of hindering their overall standing within the national and international arena, more converts have adopted a multi layered approach to success.
The rehabilitation of business activities is still far from completed; as most leading corporations are still entrenched in their old ways of doing things, in their old roadmapsÃÂold habits die hard. The only encouraging thing to keep in mind is that today, many reference points lead us to good corporate citizenship. I am by no stretch suggesting that social responsibility and business are today joined at the hip, rather that when looking at the business landscape, it is apparent that things are moving in the right direction.
After a very extensive search, a company, that embodies the spirit of good corporate citizenship and that should be held as an example for all those still waiting to take the leap of faith and realizing that better business trickle down to benefits for the environment, society and the bank account.
THE EVOLUTION OF CHANGE IN THE BUSINESS MINDSETWhile good corporate citizenship carries many prisms and still a certain level of ambiguity, the main parameters are simple to grasp. Adherence to good corporate citizenry implies that businesses pay close attention to the ripple effects of their decisions and the implementation of these decisions. No company is an island; instead it should be seen as a member of a network where all elements are interrelated and interdependent.
This might seem to be no revolutionary conclusion, but when self-interest is the only variable of concern, considerations such as those of a more social nature come distant seconds to the economic ones. The challenge in front of those advocating for change was to convince business decision makers that they stood to benefit from a change in philosophy.
The process of setting the course started slowly and with a greater emphasis on good corporate governance. Good corporate governance requires of companies that they invest in ensuring that the processes of business be not only sound but calibrated a way that eliminates waste. Each facet of business is made accountable towards the success of the entire organization and managed with a philosophy of resource maximization.
Corporate governance stresses the importance of regulating the business practices both at the internal and the external level. One of the pivotal elements of corporate governance is accountability. That element has been an important force in cultivating or preparing the business community for social responsibility.
Several governmental and independent bodies have pitched in to better structure the good governance initiatives.
In A Board Culture of Corporate Governance business author Gabrielle O'Donovan defines corporate governance as:ÃÂAn internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes.ÃÂThe need for corporate governance has never been more apparent than during the last decades, where a slew of large corporate bankruptcies and fraud allegations have captured the headlines in the United States and abroad. Corporate governance does far more than reassuring shareholders and reestablishing their faith in the quality of the management at a particular firm, it conditions the business community to begin the exercise of thinking globally because the product of such a practice transcends the business world:The positive effect of good corporate governance on different stakeholders ultimately is a strengthened economy, and hence good corporate governance is a tool for socio-economic development. (Sapovadia, 2007). Even from an economic standpoint, good corporate governance makes a whole lot of sense. In its 2002 survey on investors opinionÃÂconducted with more than 200 institutional investorsÃÂglobal consulting firm McKinsey and Company found that more than 4 out of 5 investors were willing to pay a premium ranging from eleven to forty percents on companies that engaged in good corporate governance. Fortune magazine conducted its own survey of those with the highest level of corporate governance and found that they financially outperformed other firms and afforded their investors average returns of more than 125%.
THE DESIGN OF SOCIAL RESPONSIBILITYThe transition from corporate governance to social responsibility comes in its attempt to evaluate the processes, customs, policies, laws and institutions of a corporation as they impact its stakeholders. While the word stakeholders traditionally only was used to refer to those in more direct connection with the corporationÃÂshareholders, management, board of directors, employees, suppliers, customers, and banksÃÂit has evolved to include larger and broader groups only indirectly related to the corporationÃÂenvironment, the general public and animals. Furthermore, corporate social responsibility is by design intended to make the process of corporate decision making, an intellectual exercise capable of aligning the companyÃÂs and societyÃÂs best interest so that both benefit from the participation of business in social affairs.
Past financial crisis and social turmoil have allowed us to appreciate the limitations of business in providing society with the means to arrive at better societies. We now understand that it is part of a loop, that we all are connected and that the refinement of one comes invariably through the refinement of the other. Social improvement is a participative process, where each element must contribute and refrain from hindering the existence and growth of the others. It might seem strange to talk about the birth of such a sentiment and philosophy but it was not always a given in the business world that actions carried consequences spanning over the boundaries of business.
A strong emphasis on business ethics have been part of the corporate equation for less than two decades and has been slow to become prevalent until leaders of industryÃÂconditioned to understand business positive and negative outcomes only in dollars and centsÃÂwere able to see that corporate social responsibility made sense on a dollars and cents plane. Once they saw the merit of social accounting, auditing, and reportingÃÂ a concept describing the communication of social and environmental effects of a company's economic actions to particular interest groups within society and to society at large, is thus an important element of CSR (R.H. Gray, 1987)ÃÂthey began the design of numerous industry guidelines and practices intended to cultivate and spread corporate social responsibility.
While the practice of corporate social responsibility serves us all; the business community needed some more ÃÂpowerfulÃÂ arguments to help them process the change in philosophy. The arguments came through various studies and reports conducted by the business world most influential and credible sources. While for an average and uninterested individual, the sustainability of the environment might be reason enough to engage in social responsibility, the business leaders needed more. While the argument stating that better environments, better societies, better institutions, and healthier citizens might be a desirable state for all might convince most of among us, the corporate decision makers needed more.
Early in the beginning of the 21st century, studies began to emerge analyzing the correlation between social responsibility and financial performances. In 2002, Business Ethics issued its third annual report on the 100 best corporate citizens and compared them to the remaining companies comprising the S&P 500. The result of the study were surprising to many in that although committing to social responsibility might be more difficult than not, perhaps even more costly, those firms that did significantly outperformed those that didnÃÂt. Other studies, such as that conducted by DePaul University professor Curtis C. Verschoor in January of the same year provided strong evidence of the unquestionable superiority of social responsibilityÃÂs multi-faceted approach to management for all those involved.
BIO-SPECTRAÃÂWe decided to contribute because we wanted to take action in order to be part of the solution.
We decided to contribute because the world desperately needs innovation.
We decided to contribute because we wanted to make something meaningful with our lives and talents.
We are proud to contribute in making the struggle for social change fun and sexy.ÃÂ (The Clean Attitude Philosophy)While companies should be commanded for their commitment to social responsibility, it is possible to push the bar even higher. The company I surveyed is one that has decided not only to engage in social accounting, but also to only engage in practices that could be harmonized with the fabric of better societies. Bio-Spectra decided to go beyond perceptions of social responsibility and become ÃÂgreenÃÂ to the full extent of the word.
The company produces cleaning products made entirely of natural ingredients and prides itself on the fact that their products are in a distinct category as far as their ability not to leave a single chemical trace on neither human beings nor on the environment. Their business attitude is clear and leaves no room for ambiguity, committing to ÃÂgreenÃÂ encompasses: the various steps in the manufacturing process, the ingredients, the short-term impact on health and the environment and the long-term impact of the product, right up to its disposal.
The Montreal based company has taken no shortcut in creating a business proposition that is not based marketing strategies and ploys meant to give the general public the impression that it is socially responsible, but instead has taken the mandate a full step beyond the illusion of social accountability that plagues most industries.
For example, many household products are pushed through promotional campaigns built around characteristics such as the fact that they are biodegradable, phosphate-free, or a name carrying environmentally friendly connotations. The truth is that none of these position a company as one that is socially responsible or environmentally friendly. The validity of these claims can go unverified because the government doesnÃÂt verify them unless formal complaints have been lodge, which means that companies can operate under false pretences and still collect the goodwill of environmental friendliness. Bio-Spectra, decided to set its own high standards and hold itself to a degree of accountability towards the environment and society that is unparalleled in the industry.
Its products are available internationally, the company has been the focus of many media reports and is a powerful example of the possibility to grow big and successful while committing to only conduct business if all agents of society are found enhanced by the business process.
CONCLUSIONAll in all I think that there is much to say about the current state of existence of businesses in the world. We share life habitats with some of the most powerful corporations in the world. Because we leave in a global village, the consequences of their decisions affect the daily lives of people around the globe with greater force than the worldÃÂs most celebrated empires have. For life, we depend on everything that allows us to conduct business; citizens, natural resources and the environment.
The business perspective has kept us hostage to financial reports, corporate studies and analysis and constricted our ability to reason to such a degree that we need to see correlations between higher financial performances and social responsibilities to declare it worth the costs. What if no correlations had been found, or worse, an inverse one had been found? Would the business community have rejected the call for social responsibility? I prefer not to think so. I prefer to believe in humanity where people are intelligent enough to understand the primacy of human interest and understand that it should always trump the corporate interest.
References1.http://en.wikipedia.org/wiki/Corporate_governance2.http://en.wikipedia.org/wiki/Corporate_Social_Responsibility3.http://www.goodcorporatecitizen.com/4.OÃÂDonovan, A Board Culture of Corporate Governance, Corporate Governance International Journal, Sept 20035.R.H. Gray, D.L.Owen & K.T.Maunders, Corporate Social Reporting: Accounting and accountability, Prentice Hall. 1987.
6.Sapovadia, Vrajlal K., Good Coporate Governance: An Instrument for Wealth Maximisation, Indian Institute of Management Indore - Finance & Accounting. 20077.http://www.cleanattitude.com/ Bio Spectra Home site