Societal expectations have changed
Corporate social responsibility What role does business play in the grand scheme of things, or in its community?
SAINT JOHN - It's been almost 40 years since economist Milton Friedman said the only social responsibility business has is to increase its profits, and that a corporate executive's primary responsibility is "to make as much money as possible while conforming to the basic rules of the society."
Friedman expressed this view in a provocative essay in 1970 for the New York Times Magazine, encapsulating a hard-line, free market ideology many business folk held at the time.
But as with most things, attitudes and expectations have changed over time. Increasingly, the question has been asked, "What role does business play in the grand scheme of things, or in its community?"
According to a report released earlier in July by the Conference Board of Canada, there has been growing importance in the minds of chairmen, CEOs and other business leaders about making corporate social responsibility (CSR) decisions.
The report, however, says the practice of building social-responsibility strategy has been slow to come, and suggests boards should practice more planning around building corporate social responsibility into the company mission, values, communications, risk management, oversights, committee mandates and reports to stakeholders.
Some business leaders look back and see Friedman's article as antiquated in comparison.
"It's an example of how things have changed," says Atlantic Lottery Corporation CEO Michelle Carinci, from her Moncton office.
"One of our main drivers, of course, is around responsible gaming and responsible gambling," says Carinci, who has been front and centre in the ALC's development of education programs around gambling addiction and prevention.
"What's really important from a CSR perspective is not how much money we make. Financially, you can be successful, but if you don't do it the right way, you will not survive "¦The public's impression of a company, we know, is influenced by (its) contribution to social good."
It's a far cry from when such things were strictly the job of a corporate social responsibility department, says Carinci. With the growing popularity of video-lottery terminals and casino-style gambling, dealing with addiction had to be made a boardroom issue.
The evolution of CSR from a departmental priority to a boardroom concern has been a growing trend for over 30 years, says Dr. Barry Boothman, a professor and associate dean of business at the University of New Brunswick.
"Societal expectations have changed," he says. "They do think, 'Yes, companies have to make a profit,' but that they are also embedded in the broader society and that they have to recognize that this is where you're getting your employees, this is where you're getting your resources."
According to a 2002 report from the Canadian Democracy and Corporate Accountability Commission, a privately funded think-tank, 72 per cent of Canadians agreed executives have a responsibility to consider the impact their decisions have on employees and local communities.
According to Industry Canada, nine out of 10 Canadian shareholders in 2003 wanted fund managers to take environmental and social actions into account when valuing companies.
Boothman also says courts and regulators have been slowly moving from the notion that the only responsibility of the board is to its shareholders. Workplace harassment, disclosure requirements, social issues and pollution all can have a legal and financial impact on a company.
Boothman says that while a good corporate social responsibility strategy will not guarantee profit, it will allow firms to be prepared for future social and environmental issues.
In the mid-1980s, International Nickel had to spend somewhere in the neighbourhood of half a billion dollars re-vamping its Sudbury, Ont.-based smelting plant after the province's government told the mining giant to cut its emissions by 64 per cent by 1994.
According to Industry Canada, corporate social responsibility can involve a wide range of stakeholders - consumers, employees, investors, shareholders, insurers, social and environmental groups and whole communities.
"A number of companies have tried to use CSR as a public relations tactic," says Mike Randall, a Moncton-based CSR consultant. "If it's used solely for good communications, it won't work. It has to be integrated into every aspect of an organization's operations."
Fawcett Lumber of Petitcodiac did just that when it had to close its mill in October of 2007, putting 90 full-time employees out of work.
"We explained to our employees what we were going to have to do and asked them what they needed from us," says vice-president Robert Fawcett.
"They told us they needed help with resumes and needed help being introduced to new employers "¦ so we put together job fair and professional resume-writing services."
Fawcett also brought in education counsellors, which led some of their soon-to-be ex-employees back to school.
Fawcett Lumber continues to operate other aspects of its business, and its vice-president says being a company in a small community meant it had a responsibility to both its workers and its own sustainability.
"We are still an employer here and we plan to be an employer here in the future," he says. "So we want a good relationship with our (former) employees and the community."
Boothman says what Fawcett Lumber did is becoming increasingly common.
"There is no statistical literature that demonstrates that if you're sensitive of CSR, you're going to earn higher profits or a better bottom line," he says. "But the odds are you're going to see some of these problems coming up and (have) better probability of longer-term survival."
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