Harvard Business Review Jonathan Lash and Fred Wellington devise this month on the effect of climate change on corporations and on their ability to handle the various related risks: regulatory, supply chain, product & technology, litigation, reputational, physical… and turn them into competitive advantages.
Are we seeing a change in economic and management theory embracing corporate social responsibility? Will CSR become mainstream as a corporate value any time soon?
Technically, it seems that directors are mandated by US law to put their shareholders' interests above the interests of any other stakeholder. Henry Ford himself received a supreme court ruling in 1919 when he vowed to reinvest his surplus profits in cutting the prices of his cars and hiring more workers to "spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes."
In his book The Corporation*, Joel Bakan claims that corporations relentlessly pursue their own self interests regardless of the harmful consequences they may cause to others. A concept promoted by Nobel Prize Milton Friedman who titled a New York Times article in 1970 The social responsibility of business is to increase its profits, a stand he confirmed in a 2005 Businessweek interview. For Friedman, Social Responsibility goals are to be pursued exclusively at the individual and personal level, and should be considered as a misappropriation of corporate assets and “fundamentally subversive” if pursued at the corporate level.
The controversy over Friedman's theories also sparked the US academic world. In a remarked white paper, the late management education guru Sumantra
Ghosal explained a couple of years ago how the "oversimplifying" sets of ideas that have
shaped management theories for the past 30 years have freed students
–today's actors- from any sense of responsibility, influenced social
and moral behaviors, and have led, in a self-fulfilling process, to the
worst excesses -see one of my previous posts on this subject. Ghosal entrusted the academy to promote pluralism and alternative theories and reverse the trend. With success it seems given all the articles white papers, podcasts and conferences on the subject of CSR and global warming.
Has a page been turned since Friedman passed away, and are we close to the tipping point? Large corporations -including Walmart- are starting to embrace the concept, customer and public pressure have a visible effects, and policy makers are on the job. Let's be optimistic.
*Many thanks to Lauchlan Mackinnon for pointing me to this resource.
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