Pursuing the “Common Good”

Many sustainable entrepreneurs talk about working to improve the “common good”.  Well, perhaps that mindset is the best way to approach developing and implementing stakeholder-focused standards for their businesses.

In a previous post, we discussed the argument of Garriga and Mele´ that it was possible and useful to create a classification of corporate social responsibility (“CSR”) theories based on the perspective of how the interaction phenomena between business and society are focused.  They argued that CSR theories could be classified into the following four groups: instrumental theories, political theories, integrative theories and ethical theories.

Ethical theories of CSR focus on the ethical requirements that cement the relationship between business and society and are based on principles that express “the right thing to do” or the necessity to achieve a good society.  One of the groups of theories within this category is referred to as the “normative stakeholder theory”, which has its roots in the notion expressed by Freeman in 1984 that “managers bear a fiduciary relationship to stakeholders”.  Other scholars, such as Donaldson and Pearson, built on this principle by pushing two key ideas: stakeholders have a legitimate interest in the procedural and/or substantive aspects of corporate activity and the interests of all stakeholders, not just shareholders, are of intrinsic value.  The result of all this is that “a socially responsible firm requires simultaneous attention to the legitimate interests of all appropriate stakeholders and has to balance such a multiplicity of interests and not only the interests of the firm’s stockholders”.  However, Garriga and D. Mele´ further explained that a normative core of ethical principles is required in order to understand how corporations have to be governed and how managers ought to act.  While there is far from universal agreement on just what those ethical principles should be, the normative stakeholder approach is noteworthy for placing ethics at the center of CSR.

This article is adapted from material in Introduction to Corporate Social Responsibility: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here).

Other ethical theories of CSR focus on universal rights and sustainable development.  A number of the more well-known principles of socially responsible activities for businesses that have been developed in recent years, such as the UN Global Compact, the Global Sullivan Principles and SA8000, emphasize human and labor rights, environmental protection, and economic, social and political justice by companies where they do business.  The concept of “sustainable development”, which “requires the integration of social, environmental, and economic considerations to make balanced judgments for the long term”, has been woven into prescriptions for CSR activities take into account, and balance, economic, social and environmental perspectives.  One example is the proposal to extend traditional “bottom line” accounting, which is based on financial/economic criteria to measure profitability, to a “triple bottom line” approach that not only measures financial/economic performance but also the social and environmental impacts of the company’s activities.

Notice should also be taken of the “common good” approach to CSR, which is based on the notion that the referential value for CSR should be the common good of society.  According to Garriga and Mele´: “Business contributes to the common good in different ways, such as creating wealth, providing goods and services in an efficient and fair way, at the same time respecting the dignity and the inalienable and fundamental rights of the individual. Furthermore, it contributes to social well-being and a harmonic way of living together in just, peaceful and friendly conditions, both in the present and in the future.”  They explained that the “common good” is a classical concept rooted in Aristotelian tradition and Medieval Scholastics that has been developed philosophically and assumed into Catholic social thought as a key reference point for business ethics.  Simply put, the “approach maintains that business, as with any other social group or individual in society, has to contribute to the common good, because it is a part of society”.

One of the most interesting examples of the “common good” approach is the stakeholder-focused standards for corporate governance has been developed by the Caux Round Table (“CRT”)  which describes itself as an international network of principled business leaders working to promote a moral capitalism. The CRT believes that the world business community should play an important role in improving economic and social conditions and, to that end, has developed the CRT Principles for Business to embody the aspiration of principled business leadership.  The CRT has been proactively advocating implementation of the CRT Principles at the firm level and has created a specially designed process for incorporating the CRT Principles into the culture of a corporation and is also working on ethical training for corporate boards of directors and a new ethics curriculum for business schools.  The CRT Principles are rooted in two basic ethical ideals: the Japanese concept of “kyosei”, which means living and working together for the common good enabling cooperation and mutual prosperity to coexist with healthy and fair competition; and the “human dignity”, which is described in the Introduction to the CRT Principles as referring to the sacredness or value of each person as an end, not simply as a mean to the fulfillment of others’ purposes or even majority prescription.

The Preamble to the CRT Principles acknowledges that the mobility of employment, capital, products and technology is making business increasingly global in its transactions and its effects and argues that law and market forces are necessary but insufficient guides for conduct.  Noting that businesses can be powerful agents of positive social change, the CRT Principals admonish businesses that they are expected to act responsibly and demonstrate respect for the dignity and interest of its stakeholders (i.e., customers, employees, owners/investors, suppliers, competitors and communities) in the policies and actions.  The following General Principles in the CRT Principles were intended to serve as a foundation for dialogue and action by business leaders in search of business responsibility and a means implementing moral values into business decision making:

  • Principle 1. The responsibilities of businesses extend beyond shareholders toward stakeholders
  • Principle 2. The economic and social impact of business should be focused on innovation, justice and world community.
  • Principle 3. Business behavior should extend beyond the letter of the law toward a spirit of trust
  • Principle 4. Respect for rules
  • Principle 5. Support for multilateral trade
  • Principle 6. Respect for the environment
  • Principle 7. Avoidance of illicit operations

 Of particular interest are the various Stakeholder Principles in Section 3 of the CRT Principles:

 Customers: We believe in treating all customers with dignity, irrespective of whether they purchase our products and services directly from us or otherwise acquire them in the market. We therefore have a responsibility to:

  • Provide our customers with the highest quality products and services consistent with their requirements;
  • Treat our customers fairly in all aspects of our business transactions, including a high level of service and remedies for their dissatisfaction;
  • Make every effort to ensure that the health and safety of our customers, as well as the quality of their environment, will be sustained or enhanced by our products and services;
  • Assure respect for human dignity in products offered, marketing, and advertising; and Respect the integrity of the culture of our customers.

Employees:  We believe in the dignity of every employee and in taking employee interests seriously. We therefore have a responsibility to:

  • Provide jobs and compensation that improve workers’ living conditions;
  • Provide working conditions that respect each employee’s health and dignity;
  • Be honest in communications with employees and open in sharing information, limited only by legal and competitive constraints;
  • Listen to and, where possible, act on employee suggestions, ideas, requests and complaints;
  • Engage in good faith negotiations when conflict arises;
  • Avoid discriminatory practices and guarantee equal treatment and opportunity in areas such as gender, age, race, and religion;
  • Promote in the business itself the employment of differently abled people in places of work where they can be genuinely useful;
  • Protect employees from avoidable injury and illness in the workplace;
  • Encourage and assist employees in developing relevant and transferable skills and knowledge; and
  • Be sensitive to the serious unemployment problems frequently associated with business decisions, and work with governments, employee groups, other agencies and each other in addressing these dislocations.

 Owners/Investors: We believe in honoring the trust our investors place in us. We therefore have a responsibility to:

  • Apply professional and diligent management in order to secure a fair and competitive return on our owners’ investment;
  • Disclose relevant information to owners/investors subject to legal requirements and competitive constraints;
  • Conserve, protect, and increase the owners/investors’ assets; and
  • Respect owners/investors’ requests, suggestions, complaints, and formal resolutions.

 Suppliers: Our relationship with suppliers and subcontractors must be based on mutual respect. We therefore have a responsibility to:

  • Seek fairness and truthfulness in all our activities, including pricing, licensing, and rights to sell;
  • Ensure that our business activities are free from coercion and unnecessary litigation;
  • Foster long-term stability in the supplier relationship in return for value, quality, competitiveness and reliability;
  • Share information with suppliers and integrate them into our planning processes;
  • Pay suppliers on time and in accordance with agreed terms of trade; and
  • Seek, encourage and prefer suppliers and subcontractors whose employment practices respect human dignity.

 Competitors: We believe that fair economic competition is one of the basic requirements for increasing the wealth of nations and ultimately for making possible the just distribution of goods and services. We therefore have a responsibility to:

  • Foster open markets for trade and investment;
  • Promote competitive behavior that is socially and environmentally beneficial and demonstrates mutual respect among competitors;
  • Refrain from either seeking or participating in questionable payments or favors to secure competitive advantages;
  • Respect both tangible and intellectual property rights; and
  • Refuse to acquire commercial information by dishonest or unethical means, such as industrial espionage.

Communities: We believe that as global corporate citizens we can contribute to such forces of reform and human rights as are at work in the communities in which we operate. We therefore have a responsibility in those communities to:

  • Respect human rights and democratic institutions, and promote them wherever practicable;
  • Recognize government’s legitimate obligation to the society at large and support public policies and practices that promote human development through harmonious relations between business and other segments of society;
  • Collaborate with those forces in the community dedicated to raising standards of health, education, workplace safety and economic well-being;
  • Promote and stimulate sustainable development and play a leading role in preserving and enhancing the physical environment and conserving the earth’s resources;
  • Support peace, security, diversity and social integration;
  • Respect the integrity of local cultures; and
  • Be a good corporate citizen through charitable donations, educational and cultural contributions, and employee participation in community and civic affairs.

This article is adapted from material in Introduction to Corporate Social Responsibility: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here).

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

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