Corporate Responsibility And The Environment Introduction - Business Environment

Corporate social responsibility means that a corporation should be held accountable for any of its actions that affect people, their communities and their environment. It implies that negative business impacts on people and society should be acknowledged and corrected if at all possible. Corporate responsibility, however, does not preclude organisations from making profits, nor does it mean that firms acting in a responsible manner cannot be as profitable as other firms that are less responsible. The concept requires organisations to balance the benefits to be gained against the costs of achieving those benefits. An organization that sought to act in a responsible way would need to compromise and take into account the secondary effects, i.e. the externalities of business practice when undertaking work. These responsibilities are directly linked to the essential functions the organisation performs for society and the influence it has upon the lives of individuals. The term ‘corporate social responsibility’ encompasses a variety of subjects which would include business ethics, corporate governance, business and the environment, and corporate citizen ship or business in the community.The issue of corporate responsibility has been pushed up the management agenda; driven to a degree by society’s growing doubts over previously held implicit assumptions about ethical business behaviour. This response acknowledges that the way in which much of business now operates makes it impossible to assume that those involved in it instinctively know how to ‘do the right thing’. The business community has slowly come to terms with this perception and many business leaders now appear to accept that management has a wider remit and that its decisions must involve and be transparent to a variety of bodies that include governments, citizens, shareholders, customers and employees. As a result, the issues which companies must address have broadened well beyond financial performance, to embrace corporate, ethical and environmental governance. This viewpoint is supported by a survey of European companies conducted by Harris Research (1997) which indicated that 70 per cent of companies reported corporate responsibility to be a very important issue; that 88 percent regarded corporate reputation as exerting a big influence on corporate value; and that 25 per cent saw greater expectations of social responsibility as the main reason that ‘reputation management’ was rising in importance. Historically actions that have led to improvements in corporate social responsibility have been viewed as having the potential to deflect attention away from the classical organisational aims of profit maximization and increased shareholder value. The above survey indicates a growing realization that changes in societal values mean that such actions are integral to an organisation’s ability to achieve these classical aims.Nevertheless, there is still some discussion on the extent to which it is appropriate for organisations to pursue policies that create greater corporate responsibility. The debater evolves around the purpose of business and the knowledge/abilities of those that run the organisation. If the sole responsibility of business is to the provider of capital, then all there sources of such an organisation should be devoted to making profit and any deviation from this by the managers of a firm’s resources is contrary to the objectives of the organisation. Further more, it can be argued that individuals who are given the task of running a business are not equipped to decide what actions are of a corporately responsible nature, and as such should simply operate within the rules established by the elected representatives of the people. This is not, however, a view that is shared by all, and although most commentators would agree that business will not generally behave in a socially responsible manner out of altruism, it is acknowledged that there are benefits to be gained by business by at least making some efforts towards corporate responsibility.Entrepreneurs and industrialists are increasingly taking the view that a change inbusiness culture may be a more successful strategy. Rod dick, of the Body Shop,Carey, of Lucas Industries, and others may have started this trend but it has now moved into mainstream business. In the BT publication Changing Values (1998) for instance, Sir Ian Vallance indicated that the ‘pursuit of sustainable development is not an option ... it is nothing more or less than a necessity for economic survival’. This sets out an alternative perception to the environmental responsibility of business, where by business can make a contribution by facing up to moral choices concerning profits as opposed to social responsibilities. Roddick has commented that the Body Shop continues to espouse its values in the hope that one day the cosmetics industry will wake up and realize that the potential threat of the Body Shop is not so much economic as simply the threat of good example. The Body Shop, for many, represents an alternative view of how business might be run. This alternative view, however, has become more accepted and it is interesting to note that the Institute of Directors (IoD) in an attempt to raise personal and corporate ethical standards has devised its own code of professional ethics to which it expects its members to ad here. The code goes further than any existing code of professional conduct, focusing on personal responsibility towards employees, customers, suppliers and the wider community. To summarize, there is a range of opinions over how business should interact with its environment and therefore how best to incorporate concern for the environment with incorporate policy. However, if the majority of firms do not perceive the sea change necessary in business culture to promote sustainable development, then external influences must ensure the protection of wider interests. Indeed one school of thought would argue that such control is the prerogative of elected representatives and that the attempts of business to develop social programs independent of this would be to undermine the democratic process.

In essence, the stimulus behind organisational developments in the environmental management of business process and practice lies on some continuum between the need to operate in the confines of what is legally acceptable and the desire to create a business that is sustainable.


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