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As
Grand Metropolitan’s first Report on Corporate Citizenship
(1997) states:
"Integrity
has two meanings, First, it is the quality of being honest,
upright, ethical and uncompromising about values and principles.
But
integrity also means the quality of being integrated.
This second meaning is also a vital part of what GrandMet
is and aspires to be. In addition to being honest, upright
and ethical, we want to be understood as both consistent
and in tune with the societies and communities in which
we live and make our living."
We
believe that the concept of social responsibility has
begun to move, in response to globalisation, beyond the
first definition of integrity (reflecting the earlier
concerns with "business ethics") and toward
the second. A variety of forces – geopolitical, economic,
and demographic – have been driving this process, and
contributing to the public’s changing expectations of
business.
One
of the first significant influences, although business
by and large did not recognize it as such, was the signing
of the Universal Declaration of Human Rights in 1948.
This document, created by the members of the new United
Nations in the wake of World War II, moved the concept
of international law well beyond traditional maritime
and trade concerns, and into the less mapped territory
of civil, political, economic, social and cultural rights.
It established for the first time a measure of international
consensus on these core rights of citizens. Its Preamble,
as well, clearly stated that protection of these rights
was the duty of all societal institutions, not only governments.
The implications of this statement have become more and
more contentious in the 50 years since, with the apartheid
era in South Africa producing the first major collision
between heightened democratic expectations of the world’s
peoples and the practice of "business as usual."
Companies were asked by anti-apartheid campaigners to
make major investment and disinvestment decisions on moral
grounds; those decisions were not simple, and their results
are still being debated today.
Even
during the so-called "Me Decade" of the 80’s,
social issues were becoming more and more visible on corporate
radars (British organisation "Business in the Community",
for example, was founded in 1982). From 1989 onward, the
process accelerated, partially because of the collapse
of the socialist economies – but the driving forces were
not all political. The economics of globalisation, and
the creation of a world wide market for the first time
in a century, led commentators to start treating "capitalism"
and "democracy" as twinned values. The western
economic model seemed destined to claim all of Asia, Africa
and Latin American, with American and European transnational
corporations (TNC’s) playing modern versions of Christopher
Columbus, Vasco da Gama, Hernando Cortes, John Cabot and
Jacques Cartier. As these corporations surged into what
had been closed markets, and non-European social systems,
questions began to arise about how those corporations,
and the financial institutions that supported them, would
use their power.
1995
then proved to be a flash-point year, as Royal Dutch Shell
found itself grappling publicly with two explosive issues:
the environment and human rights (Brent Spar and Nigeria).
1995 was also the year that "When Corporations Rule
the World" was published, a book that declared: "...once
beneficial corporations and financial institutions (have
been transformed) into instruments of a market tyranny
that is extending its reach across the planet like a cancer,
colonizing ever more of the planet’s living spaces, destroying
livelihoods, displacing people, rendering democratic institutions
impotent, and feeding on life in an insatiable quest for
money."³
These
kinds of accusations clearly go well beyond the old "business
ethics" case studies and into the deepest questions
a society can ask itself. The wave of books that have
been addressing "business and social responsibility"
for the past decade therefore examine the subject from
a refreshingly wide variety of angles: philosophical,
religious, academic, even economic. (A list of these for
further reading can be found in Chapter 10.)
Despite
the significance of these recent developments, it is important
to remember that the role played by public opinion in
shaping corporate behavior is not new. There are lessons
to be learned as well from earlier periods in which companies,
indeed entire industries, had to change or die in response
to criticism, as we discuss in Chapter 2. The effects
of globalisation, however, have changed dramatically both
the nature of that criticism and its targets. According
to the United Nations, in 1975 there were 7000 transnational
corporations; in 1994, there were 37,000. Globalisation
has changed not only industry structures, but communications
networks and markets as well. Business behavior may have
had worldwide impact in the 18th and 19th
centuries, and even before then (witness the East India
Tea Company) but information about those effects, and
the public’s ability to react, now reaches worldwide audiences
also.
One
annoying aspect of the term "globalisation"
is that while thousands of people use it, few define it
precisely, thus leaving the rest of us unsure whether
we are discussing the same thing. In our view, the term
globalisation refers not to one single process, but serves
as shorthand for several related processes. At the Tallberg
conference referred to above, executives in a working
group suggested the following phenomena as comprising
"globalisation":
- an
increasingly shared awareness across many publics
- a
new international "financial web"
- new
open space into which dominating cultures can move
- progress
from "inter-national" to global institutions
- declining
importance of geography
- dangerous
new linkages possible
- greater
speed of events
- trend
away from nation-states and toward regions or "tribes"
Unpacked
in this way, it is possible to see clearly how each of
these developments has helped to broaden society’s expectations
of business and its social responsibility. The "shared
awareness across publics" means that civic or voluntary
organisations can now represent many millions, rather
than hundreds, of consumers or voters, and that the new
international media can mobilise those millions overnight
if it chooses. The new "financial web" means
that transparency, probity and rule of law are more important,
to more people, than ever – violators of these principles
can bring large segments of the entire network down (witness
the Asian crisis). The "open space" for dominating
cultures means more and deeper debate over values as those
cultures collide with others who reasonably, feel their
very existence to be threatened. The creation of global,
as opposed to "intern-national" institutions
means a transitional period during which old institutions
will appear increasingly ineffective and new ones (like
multinationals) represent an unknown force. The "declining
importance of geography" means that people all over
the world can consider themselves "stakeholders"
in decisions made by businesses anywhere. "Dangerous
new linkages" refers to any number of emerging networks
– technological, criminal, financial – whose impacts the
public rightly feels unsure of, and over which they feel
less and less control. The "greater speed" at
which the world now operates means that a company whose
intelligence networks break down, or which becomes insulated
from its markets or communities, can be blindsided by
changing attitudes more quickly than ever. Finally, the
shift of power away from nation states means that the
public in general requires more accountability from other
powerful actors such as business, and expects them to
respond directly to the demands of public opinion rather
than waiting for that opinion to be mediated by government
in the form of legislation or regulation.
Each
of these aspects of globalisation, then, represents another
dynamic pushing companies toward a broader interpretation
of their obligations to society. It was easy for many
not to perceive this development at first, especially
in the wake of the apparent collapse of "socialist"
ethics around the world. For most market liberals, that
collapse was a long-overdue response to communist regimes’
distortion of basic economic principles in the service
of "political" or "social" goals.
It was therefore at first perceived by business leaders
as a signal that these goals themselves were less legitimate
or valid – that the market alone could and should be allowed
to solve every human problem. Talk of social responsibility,
especially if it came from trade unions seeking to impose
"Western" labour standards on signatories to
international trade agreements, struck many of those leaders
as dangerous backsliding toward the regulated, inefficient
economies of social planners.
This
apparent conflict between efficiency and equity has produced
a wide range of proposed solutions, ranging from extreme
libertarian to unreconstructed advocacy of "public
ownership of the means of production." Most of us
fall somewhere within the broad middle, seeking a balance
of cost and benefit that works both for our own enterprises
and for society as a whole. The discrediting of the state
socialist model did not, as many thought it would, answer
the question of how to find that balance – it reopened
it on different terms.
The
other worldwide phenomenon that has triggered new societal
demands on business is closely related to globalisation.
The privatisation process has advanced almost as quickly,
with countries that once thought only governments could
operate (for example) airports, seaports, railroads and
public utilities rushing to turn these functions over
to the private sector. The graph below illustrates clearly
the scale and parallel development of the two processes
in one of the most important developing economies, China:
In
the United States, privatisation of apparently core government
functions like criminal justice and education has become
a subject of experiment and, as will be noted later, in
countries such as Russia, even public safety has been
de facto privatised.
The
trend toward privatisation has led, in turn, to further
blurring of the line between business and government.
The implications of these overlapping responsibilities
are far-reaching and not yet clearly understood. If voters
are no longer the ultimate source of accountability for
privatised function, who is? Should shareholders of companies
exercising formerly public functions have different expectations
in terms of return than shareholders of other types of
companies?
Both
privatisation and globalisation have therefore imposed
dramatic changes on both public and private sectors and
raised issues of balance between competing interests and
stakeholders. Along the spectrum of possibility lies a
wide range of choices, and it will fall to business to
make many of them. The evidence is accumulating, as this
book will demonstrate, that public opinion is increasingly
pushing those choices away from the pure free-market extreme
(which never, in actuality, operates without some form
of societal restraint anyway). That demand on the part
of the public, the search for a proper balance, is at
the heart of the call for corporate social responsibility.
The
example of the environmental movement is a good illustration
of the evolution of the conflict. As one CEO has described
the process of coming to terms with environmentalism:
"Thirty years ago we objected; twenty years ago we
started to accept it; ten years ago we started to move."
One way of explaining the change is to assume that companies
simply gave in to the growing power of public concern
for the environment, without any real change in belief
systems. In some cases this may of course be true; but
in others, it seems clear that perceptions have genuinely
changed, and that business has come to see that destructive
environmental policies, even if they appear "efficient"
and "cost-effective" in the short run, are literally
not sustainable in the long run. According to some executives,
other issues of social responsibility (such as human rights,
for example), are now at the beginning stages of the same
process.
An
even more basic way that environmentalism set the terms
of this discourse was by diffusing systems thinking throughout
broad populations. Thirty years ago, environmental organisations
had to work hard to convince most people that the health
of their gardens in Provence or Australia could be affected
by damage to rain forests in Brazil, or ozone layers in
Antarctica. Now, these connections are understood by millions
on a very intuitive level, and their importance is reinforced
by people’s being able to observe the power and reach
of the financial, technological and economic networks
that globalisation has created. More people than ever
feel affected, actually or potentially, by decisions made
by corporations, and they are in a better position than
ever to act on those feelings.
These
then, are some reasons why the notion of "business
ethics" – which was essentially driven by nationally-based
legal and regulatory systems – has given way to a broader
discussion of "social responsibility." Companies
that became global or transnational while still operating
within ethical systems aimed at complying with purely
national standards and avoiding illegal behavior have
found themselves, simply, playing on the wrong fields
by the wrong rules.
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