August 24, 2010
In a year when all eyes have been on the oil spill in the Gulf, automobile recalls, and the ongoing debate over behavior in the banking system, the Wall Street Journal—inexplicably—weighed in today by publishing a piece titled "The Case Against Corporate Social Responsibility." University of Michigan business school professor Aneel Karnani's piece was nothing more than a rehash of the arguments first made more than four decades ago by Milton Friedman. His assertion that delivering returns for shareholders is the only responsibility of business was wrong then, and it is wrong today, as even Jack Welch now acknowledges.
These arguments get trotted out every so often, as The Economist did in a 2005 cover story that it essentially recanted in 2008. Still, it is incomprehensible to me that anyone would still argue that companies considering the economic, social, and environmental impacts of their operations are making a mistake. Not surprisingly, Karnani could not provide a single example of when corporate responsibility has inflicted harm. The weak support for his arguments may be because there is such considerable evidence to the contrary. Most companies have discovered—to their benefit and ours—that considerable opportunity awaits companies that leverage their resources to tackle the world's biggest challenges.
I have the privilege of leading BSR, an organization that works with nearly 300 member companies—including some of the largest in the world—to integrate social, ethical, and environmental principles into their business strategies. In my experience, companies like GE, Nike, Ford, and Hitachi embrace corporate responsibility both as a means of advancing their commercial interests and to address big global challenges like health, energy, mobility, and efficiency. The examples of their impact are easy to come by: By developing more efficient trucks, Walmart has saved immense amounts of money while reducing its logistics costs. Nike has used sustainability to innovate new products such as those in its Considered line, which are designed with fewer toxics and waste and more environmentally preferred materials. And Unilever is using corporate responsibility to find new market opportunities for everyday products including soap and tea. What's more, new companies such as Method, and older enterprises such as Seventh Generation have built their very identities around environmental questions.
These are just a few of the cases that prove that companies focusing on corporate social responsibility not only generate profits, they also benefit society. Indeed, if, as Karnani posits, a focus on CSR were "dangerous," we would not see so many companies reporting publicly on their corporate responsibility efforts, nor would we see so many business school students (including many of those at the University of Michigan, where Karnani teaches) flock to work for companies that embrace a social purpose along with their business interests.
The businesses that embrace corporate social responsibility are best positioned to grasp the market opportunities in our fast-changing world. Karnani does business a disservice by rejecting an idea that has great power and potential.
Professor Karnani teaches at the Ross School of Business at the University of Michigan. That's where I'll be in October, speaking at the annual conference of Net Impact, a wonderful organization that promotes CSR in business schools. I suspect that the 1,500 business students who attend the conference each year will have something to say about Professor Karnani's "case" against CSR. I wonder if the good professor will try to convince these ambitious business students that they should forsake their interest in CSR. Maybe he'll be out of town instead.
Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.