Responsible businesses operate in such a way as to benefit the wider world while making a profit. To do this they consider their impact on the environment, society, employees, customers, suppliers and other stakeholders.
Summary by The World of Work Project
Responsible business is an increasingly common, yet at the same time rather opaque phrase. Most people agree that being responsible as a business is a good thing. However, finding consensus on exactly what responsibility looks like is more complicated.
Part of the reason it’s hard to agree on what responsible business means is because we don’t have consensus over what responsibility means at a societal level either. Given this, we start our consideration of responsible business with a look at what responsibility means for society.
Responsibility at a Societal Level
Many nations differ in their views as to what responsibility looks like at a societal level. To overcome this, some efforts are being made to establish consensus in this area. The best global framework that we currently have in relation to what responsibility looks like at a societal level is the UN’s Sustainable Development Goals (SGDs).
The 17 UN SDGs cover a wide range of social and environmental factors. These factors will shape what our human experiences on earth will be like in years to come. They were adopted by all UN member states in 2015 as part of the 2030 Agenda for Sustainable Development which set out a 15-year, global plan to achieve the Goals.
The Role of Business
There are competing views as to what the role of business should be in helping society reach its goals.
Some people think the only role of business should be to maximize profit and returns to shareholders (Shareholder Value Maximization). However, increasingly people think that businesses should think about their impacts on all of their stakeholders (Stakeholder Capitalism).
If we try and ignore this split for the moment and simply think about the direct impacts that businesses can have on the world, then we can say that a responsible business is one that helps society achieve the UN Sustainable Development Goals. Or at a minimum, it is one that doesn’t hinder society in its effort to achieve these goals.
Don’t just take our word for this though. Business in the Community defines a responsible business as one that puts creating healthy communities and a healthy environment at the center of its strategy to achieve long-term financial value. In other words, a responsible business is one that seeks to help create healthy outcomes for both people and the plant. This is exactly in line with the UN’s Sustainable Development Goals.
There are many different ways that organizations can be responsible. These include understanding their supply chains, treating their employees well, managing their waste products and so on. Remote working could be part of a responsible strategy, as could many other things.
We’ve recorded several other podcasts that explore responsible business. These include an interview with the leader of a B-Corporation, which you can listen to below.
The World of Work Project View
Responsible business is an excellent thing. The most responsible businesses we have manage to improve their communities and the environment while making a profit.
However, this is all rather nuanced and complex. Managing a wide range of stakeholders isn’t easy for organizations. When returns are increased for one set of stakeholders, they usually are reduced for others, at least in the short term.
What this means is that the level of responsibility that an organization exhibits is really the product of the competing influences that its stakeholders have over it. Some stakeholders will push more for responsibility than others, and some stakeholders have more influence than others. And many stakeholders have little immediate incentive to influence their businesses to behave in responsible ways.
Because of this lack of immediate incentive for many organizations, alternative levers of influence are often required to move organizations towards responsibility. These levers include things like consumer action, regulators and legislation. While many industries push for self-regulation, this often leads to poor outcomes for the majority of stakeholders.
In our view we, as members of society, need to do more to drive our organizations towards responsibility.
Of course, responsible business brings together many complex, interconnected and systemically linked topics, so we’ve not even really scratched the surface of it here. We know we’ve not been broad or deep in this post, but it’s a subject we’re passionate about, so we wanted to at least get into onto the table for discussion!