- The Strength of the Private Sector
- Corporate Responsibility
- Are good ethics enough?
- Potential for Impact
- Generation Z Cares
- Purpose Pioneers
- Key Stakeholders
The Strength of the Private Sector
Businesses play a significant role in our economy and society. As we see now with the novel coronavirus, big and small businesses are heavily impacting the nation for better or for worse. The current economy has made it hard for businesses to generate revenue, causing businesses to cut expenses wherever they can. Because many companies cannot afford to keep their employees, a reported 3.3 million Americans have filed for unemployment benefits. This unfortunate reality has increased unemployment to 5.5% from 3.5% in February, almost bringing our economy into a recession (Fowers et al.). While many businesses are barely making it, some have taken the initiative to fight the virus, keep small businesses alive, or show appreciation for those on the frontlines. Facebook took on several initiatives, including donating $100 million to small businesses impacted by coronavirus and giving $1,000 bonuses to each of its employees (Fisher). Sweetgreen, a chain of salad restaurants, continues to donate free salads to doctors on the frontlines battling the virus and caring for those in need. Companies like New Balance and 3M are using their factories for manufacturing face masks for our country (Pound).
It is evident that businesses play a major role in our society and have the potential to go beyond providing employment opportunities to leveraging their resources to provide for those in need. While COVID-19 is a pretty extreme circumstance, it has been a strong indicator of the standards our country has for businesses to step up in times of need.
Businesses have opportunities and often obligations to take part in solving our nation's problems. The potential for businesses to solve social issues is immense, and for that reason, many companies make it part of their mission to give back and leverage their resources for good. Salesforce and Unilever are two companies that have made it part of their mission to do good beyond their regular business operations. They are doing this by implementing community service and give-back programs for their employees and stakeholders. In a New York Times op-ed, CEO and Founder of Salesforce Marc Benioff wrote, “It’s time for a new capitalism — a more fair, equal and sustainable capitalism that actually works for everyone and where businesses, including tech companies, don’t just take from society but truly give back and have a positive impact” (Benioff). Similarly, CEO of Unilever Paul Polman stated, “We have long known about the many challenges we are facing - inequality, poverty, youth unemployment and climate change, just to name a few – and I have always believed that everyone – including business – has a role to play in addressing them” (Schawbel).
On the contrary, some believe that social responsibility initiatives are not within businesses wheelhouse, and they should focus on generating value for shareholders while remaining moderately responsible and ethical. As we see with COVID-19, the value even not entirely mission-driven companies add to the economy is immense. By conducting their normal, bare minimum practices, they are keeping people employed and powering our economy. The private sector provides nearly 129 million jobs to American citizens (“All Employees”). Nitin Pai, the co-founder of a public policy research center called The Takshashila, states, “Yes, companies have a social responsibility, but it is not to engage in philanthropy. Rather, their fundamental social responsibility is to generate wealth for their shareholders in a law-abiding, ethical and sustainable way.”
The debate on whether businesses should solve social issues or simply be ethical and add value to society through the operations of their organization is multifaceted. Important topics related to the question are the harm businesses are having, the potential they have to solve social issues, and the expectations of customers, partners, and employees.
Are good ethics enough?
The essence of this controversy is whether businesses need to go out of their way to be doing good or simply have the right practices to not cause harm. The key definitions for this issue are what it means to simply be an ethical organization who does not cause harm and what constitutes means to go beyond your organization to make a difference. First, according to The Guardian, “a truly ethical company will be one that is not causing damage to the environment, exploiting its workforce by paying low wages, using child labour, or producing products which are harmful or dangerous.” This excerpt encapsulates the multiple ways businesses can avoid doing harm. To ensure companies are recognized for their ethical standards, certifications like NSF and Fair Trade approve that products are manufactured with “specific standards for safety, quality, sustainability or performance” (Marketing).
If a business wants to do good beyond ethics, there are multiple ways to do that. A commonly used term is corporate social responsibility (CSR). According to Investopedia, companies who implement CSR strategies are “conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.” This definition clearly indicates that socially responsible companies care about the impact they have outside of the operations of their business. B Corp, an organization founded in 2006, serves a certification purpose similar to NSF except that it is for companies with a great commitment to social and environmental responsibility, on top of the basic ethical standards that have become mainstream.
For the purpose of this article, ethics will refer to conducting business in a just manner, and CSR will refer to taking initiative beyond the value running a business has for economic reasons, but also the impact it can have on our society.
Potential for Impact
Both the potential for good business have and the harm that merely ethical companies may cause are the major cause and effect relations with this issue. First, businesses' potential for good is immense. TOMS, a trailblazer in the social impact space, has impacted 96.5 million lives through its one-for-one business model. They have donated shoes, glasses, and other essential resources to those in underdeveloped countries (“Your Impact: TOMS®.”). Warby Parker, a direct-to-consumer brand that followed suit, has distributed over 40 million pairs of glasses to people in need (Lagorio-Chafkin). Both companies have not done this alone. They leveraged strategic partnerships with nonprofit organizations and NGOs to deliver to those in need in effective and impactful ways. For a not entirely mission-driven company, Salesforce has enacted a model that commits them to donate 1% of all profits, resources, and employee time. Through this model, they have donated over $240 million, 3.5 million hours, and product to over 39,000 nonprofits (“Pledge 1%.”). Though these companies are large and successful, we see that businesses have immense potential to impact our world beyond providing jobs and adding value with their products or services. Additionally, small pledges of 1% can add up to create a tangible impact on those in need. Small businesses, too, can drive social impact by leveraging its resources, including customers, employees, products, and profits.
For businesses who are working and manufacturing up to ethical standards but have not taken initiative beyond their organization or addressed their organization's negative impacts, here we will dive into the potential harm of these businesses. A clear example would be a ridesharing service called Uber. Uber does indeed add value to the economy and provide a unique employment opportunity for thousands of citizens, but their negative impacts cannot be discounted. Drivers use up tons of gasoline, harming our environment. They also spend a lot of time driving around looking for new business, which crowds up the roads significantly. Yes, Uber is an ethical company, but they do have negative impacts on our society and environment. (Schmitt).
Another example is Instagram, owned by Facebook. Facebook does business professionally. They add value to society through their product and in providing jobs for our country. Their product allows for people to stay in touch, nonprofits to raise money, and small businesses to build traction. Where is the harm in their product? First, Facebook lost the trust of many customers in December 2018 with their scandal. They sold users’ information to a large data company without permission. Yes, this was illegal, but it did not harm anybody directly. For this reason, the company is deemed ethical by our definition – despite their lack of care for its users (Blumenthal). As for Instagram, their algorithm and software is actually designed to be addicting and harms its users’ mental health. An article by Time states that Instagram is correlated with high levels of anxiety, depression, and bullying (MacMillan). This is serious for a company whose target market is teenagers. The company has no legal or ethical obligation to adjust their platform, and this is where the boundaries of social responsibility become an issue. Though businesses do positively impact society in many ways, their harm must be counted as well.
Generation Z Cares
Companies going beyond what is legal to genuinely benefit society is appreciated by customers and employees. In an article posted by Ripple Match, they state, “more than 50 percent cited a brand’s social consciousness as something that influenced their purchasing decisions.” Additionally, “94 percent of Gen Z respondents to a Cone Communications survey said they believe companies should help address critical social issues” (“Does Generation Z Care”). It is evident that Generation Z, comprised of most of our economy’s future customers, cares about businesses’ social responsibility beyond basic ethics, which have become mainstream. Companies who have adopted social responsibility initiatives are leveraging this as a competitive advantage, but it is only a matter of time before this is the new normal. Next, as people continue to want to work for purposeful companies, employees are holding businesses to higher standards as well. Also depicted in Ripple Match’s article is a chart on the most important parts of their job. According to respondents, social impact initiatives are equally as important as compensation and more important than company prestige. Customers and employees understand that businesses do add value to society in many ways, but there is a new standard to also add value in social or environmental ways.
Businesses who believe in CSR have been trailblazers for the concept and other businesses following in their footsteps. Founded by CEO of Salesforce Marc Benioff, Pledge 1% is a nonprofit organization dedicated to advocating for Salesforce’s 1% model. Founder of TOMS Blake Mycoskie continues to put out his own content on the success he has seen in business for doing good and advocates for other businesses to be socially responsible as well. Based on my analysis and experience in social impact, younger business owners are far more likely to implement social responsibility strategies, as they are generally more proactive when it comes to social issues. They thrive on empowering their shoppers to do good and drive real social impact. Older business owners are typically a bit more skeptical when it comes to doing good because it is unclear how it benefits the bottom line. They generally disagree that social responsibility is their obligation as a business. Legally, social responsibility has not been enforced, though tax benefits are given to philanthropic businesses. Now more than ever, all businesses have recognized the importance of social responsibility but have not fully engrained this into their operations because it is still not seen as imperative or part of their responsibility.
Customers, employees, owners, and shareholders all have the power to shift the issue. It is up to customers to continue to hold businesses to high standards. Generation Z will continue to do so for at least the next few years, but what the generations to follow will expect is unknown. As brands continue to build emotional connections with customers, it is inevitable that they will turn to social impact to do so. As with employees, currently, their needs align with the idea of businesses being socially responsible, and it's only a matter of time before businesses make a leap from being ethical to responsible. Of course, owners and shareholders are the ultimate decision-makers on whether businesses will be responsible. The major incentive for this group is profitability, and until greater profitability is proven with social responsibility, only those who its believe in its future potential will hold themselves accountable today.
Though business inherently does good for the economy and our society, based on the harm of not taking on social responsibility and the potential good it could bring, ethics may be too low of a standard for businesses. The debate on whether businesses should be held accountable for social issues is strong and still evolving as our economy shifts to purpose-driven businesses. My Argument of Conviction will stand for the side that businesses should be held responsible and explore the business case for doing good.