Capitalism With a Conscience

Awareness of Corporate Social Responsibility Gains Ground

NEW YORK, NOV. 29, 2003 ( A theme of growing importance in the area of business and ethics is the concept of corporate social responsibility. Both international organizations and public opinion are increasingly demanding that private companies take on a greater role promoting the well-being of the communities where they operate.

On a global level this is being promoted through the United Nations’ Global Compact. Launched in July 2000, the initiative seeks to promote “responsible corporate citizenship.” Under the Global Compact, companies are invited to adhere to nine principles in running their activities. The principles are subdivided into three sections:

— Human rights

1. Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence.
2. Make sure that they are not complicit in human rights abuses.

— Labor standards

3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
4. The elimination of all forms of forced and compulsory labor.
5. The effective abolition of child labor.
6. Eliminate discrimination in respect of employment and occupation.

— Environment

7. Businesses should support a precautionary approach to environmental challenges.
8. Undertake initiatives to promote greater environmental responsibility.
9. Encourage the development and diffusion of environmentally friendly technologies.

The Global Compact relies on voluntary compliance and its organizational structure is that of a network, consisting of a number of U.N. bodies. Governments, companies, labor groups and nongovernmental organizations also participate. Recent activities organized by the Global Compact include conferences in Spain and Germany, involving large numbers of representatives from companies, governments and civil society.

An article by Peter Utting in the first number of the magazine United Nations Chronicle for this year analyzed the success so far of this initiative. Utting, senior research coordinator at the U.N. Research Institute for Social Development, observed that proponents consider the initiative “as an innovative and pragmatic approach that can reform corporate culture by instilling new values and mobilize the resources of big business for social and sustainable development.” In this view, cooperation and voluntary compliance takes precedence over a more heavy-handed regulatory approach.

However, critics worry that “it may be doing more to enhance the reputation of big business than aiding the environment and people in need.” Not only can companies pick and choose among the principles they wish to concentrate on, but there is little monitoring on how well companies are complying with the principles.

In the end, Utting considers that in spite of its weaknesses and limited achievements so far the Global Compact provides a useful forum where issues of social justice and development can be addressed.

U.N. Secretary-General Kofi Annan sees it the same way. In a speech Oct. 7, Annan explained: “The compact is not a code of conduct. It is simply a platform, an arena, a framework for cooperation and learning. It seeks solutions to societal problems, while ensuring that markets remain open and that globalization works for all people.”

Companies’ reaction

Applying these principles in individual companies is a lot more complex, as a book published earlier this year reveals. In “Empires of Profit: Commerce, Conquest and Corporate Responsibility,” Daniel Litvin examines a number of case studies ranging from 19th-century India to current day examples.

Litvin, a consultant and writer on economics issues, notes how the adverse reaction to some aspects of globalization has forced business to reply to criticisms of their practices. The response formulated under the heading of corporate social responsibility covers a wide range of activities, ranging from the publication of business codes and the practice of social auditing, to public relations campaigns.

He notes that a difficulty in the area of corporate social responsibility is the wide range of factors that are involved. Human rights, labor concerns and the environment are only some of the areas that lead to conflicts between companies, local populations and governments. Ethnic conflicts in the zones where companies operate; conflict over distribution of economic resources; and dissent against the government of the day — all can give rise to protests over how a business operates.

As well, even seemingly positive steps taken to implement ethical principles can have their drawbacks. Litvin cites the example of how protests by U.S. consumer activists led Bangladeshi factory workers to stop using an estimated 50,000 child workers under 14. Due to their families’ poverty these children were subsequently driven to find other work, in much harsher conditions.

Overall, Litvin concludes that his case studies reveal a twofold problem. First, in many cases the social problems facing companies have been too complex for them to cope with. Second, “the corporate giants have shown themselves to be a particularly clumsy and fumbling breed.”

To improve matters he proposes a couple of recommendations: for companies, a greater attention to the complexity of the underlying situations with which companies must deal; and on the part of Western and host governments, more concern with the social context in which investment decisions are taken.

Profits or people?

Another perspective on the issue comes from John Stapleford, professor of economic development at Eastern College in Pennsylvania. In his 2002 book, “Bulls, Bears and Golden Calves: Applying Christian Ethics in Economics,” Stapleford dedicates a chapter to social responsibility.

A good part of economic theory, he notes, assumes that profit maximization is the main objective of business: If a company does not make a profit in the long run it will close its doors. Additionally, businesses already make a substantial contribution to social well-being just by producing their goods and services and creating jobs.

But, he continues, we live in a fallen world where egoism, greed and injustice often surface. Moreover, not all methods used to maximize profits are ethically acceptable. Even abiding by the letter of law is sometimes not enough, since some laws unjustly sanction social inequities.

Stapleford makes a number of recommendations. He advocates a free-market system, because the existence of competitors goes a long way to keeping companies honest. He also encourages Christians to put their beliefs into practice in their work, especially when they can influence management decisions. He further supports the enforcement of government regulations that actually achieve their desired effect.

In general Stapleford emphasizes the individual’s responsibility in dealing with these questions. Whether an employee, manager or customer, each of us must be prepared to respond to unethical behavior and choices in business affairs, he says. This means being well informed as well as actively living our Christian faith.

The Catechism of the Catholic Church, in No. 2432, recognizes that profits are a necessary part of business activity: “They make possible the investments that ensure the future of a business and they guarantee employment.”

Yet No. 2426 observes: “Economic life is not meant solely to multiply goods produced and increase profit or power; it is ordered first of all to the service of persons, of the whole man, and of the entire human community.” While economic life legitimately functions within its proper methods, it must also “be exercised within the limits of the moral order, in keeping with social justice so as to correspond to God’s plan for man.” Greater attention to social obligations by business is a part of fulfilling this plan.

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