Responsible businesses operate in such a way as to benefit the wider world, including the environment, society, employees, customers and suppliers, while also attempting to make a profit.Summary by The World of Work Project
Responsible business is an increasingly common, yet at the same time rather opaque phrase. While we can all agree that being responsible as a business is a good thing, finding consensus on exactly what responsibility looks like is more complicated.
Part of the reason for the confusion over what exactly responsibility means when it comes to business is that there isn’t always 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
While our nations differ in their views as to what responsibility looks like at a societal level, some efforts are being made to establish consensus in this area. The best global framework that we have at the moment that provides guidance in relation to what responsibility looks like at a societal level is the UN’s Sustainable Development Goals.
The 17 UN Sustainable Development Goals (SDGs) cover a wide range of social and environmental factors that 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 that the only role of business should be to maximize profit and returns to shareholders (Shareholder Value Maximization – We haven’t written about this yet), while others think that businesses should think about their impacts on all of their stakeholders (Stakeholder Capitalism – we haven’t written about this yet).
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, in line with the UN’s Sustainable Development Goals.
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, as well as to generate a profit for their shareholders.
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!
Sources and further reading
Where possible we always recommend that people read up on the original sources of information and ideas.
The concepts behind this post is based on the UN Sustainable Development Goals, work by Business in the Community, Kate Raworth’s book “Doughnut Economics” and general research and conversations we have had over the course of our careers.
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