It's Not a Trade-Off

Charles O. Holliday, Chairman and Chief Executive of Dupont, and Chairman of the Business Roundtable's Environment, Technology and the Economy Task Force, agrees with our assessment that Steven Pearlstein missed the point in his recent article "Social Responsibility Doesn't Much Sway the Balance Sheet,"

As said by Holliday on Monday, October 24, “The initiative is not about corporate social responsibility but sustainability. Sustainability is no longer a trade-off between what's good for business and what's good for the environment. Leading-edge practices and products must accomplish both. Sustainability must be built into the products we create and the processes we use to create them.” (Full text of his reply can be found here: http://www.washingtonpost.com/wp-dyn/content/article/2005/10/23/AR2005102300901.html).

According to their website, the “Business Roundtable’s S.E.E. Change Initiative (Social. Environmental. Economic.) will promote better business and a better world by encouraging Roundtable members to adopt sustainability principles as a business planning tool and to showcase the results achieved.”

Corporate Social Responsibility: Good for Business, Good for the Community

Steven Pearlstein’s article Social Responsibility Doesn’t Much Sway the Balance Sheet (Wednesday, October 5) concludes that there is no business case for corporate citizenship, or what is commonly referred to as corporate social responsibility (CSR), while encouraging increased government regulation. Mr. Pearlstein’s comments are based largely upon the conclusions reached in the recent book “The Market for Virtue” by David Vogel. We believe these conclusions are both misguided and outdated.

CSR pays off, according to two of the most definitive studies on the subject. Consider: Innovest Strategic Value Advisors looked at 60 research studies over six years, finding that 85 percent showed a positive correlation between CSR and financial performance. While Mr. Vogel cites what many consider to be the most significant paper on CSR – Marc Orlitzky’s study of studies, which found a positive correlation between CSR and financial performance – he does not factor these findings into his discussion.

As proof of the lack of effect CSR has on a company’s performance, Mr. Pearlstein mentions that many companies, such as Enron, Fannie Mae and Merck, were once considered good corporate citizens. Let us be clear: CSR is not about publishing glossy reports which tout a company’s understanding of the need to be a good corporate citizen, or issuing press releases or developing commercials highlighting a few small initiatives, or corporate philanthropy. True CSR is about the alignment of business strategy and operations with the needs and desires of all stakeholders, including shareholders, employees, consumers, investors, and local communities.

The movement toward socially responsible business practices (in commitment and deed not just in rhetoric) helps to ensure that capitalism serves as a rising tide that raises all boats rather than as a driver for selfishness and personal gain. And for that, the Business Roundtable – and other groups and companies – should be lauded for their efforts rather than dismissed.

Full Text of this article can be found here: http://www.dcsbn.org/news/news_detail.cfm?id=10

The full text of this article was submitted to the Washington Post by the Executive Director and the Board of Directors for the Washington DC Sustainable Business Network

Vanishing Middle Class

Mounting evidence shows that CSR pays off. However, it is difficult for many companies to do the right thing when faced by intense competitive pressure to reduce costs. As the Washington Post writes in The Vanishing Middle, Delphi Corporation’s recent bankruptcy will probably force them to lay off thousands, and serve as an excuse to lower their worker’s salaries and benefits in the future. This is a glaring example of America’s disappearing blue-collar middle class. The economic argument is simple: When labor costs are roughly ten times cheaper in Mexico or China, companies must decide whether to pay their workers a good wage with benefits – the kind of system that saw the rise of America’s great middle class in the 1950s, or to slowly but surely loose ground to competitors who don’t face the same labor costs. What can we do?

I am by no means advocating that we turn back the clock on global trade, as a growing number of countries are taking advantage of an increasingly open and more fair trading regime to lift millions of their citizens out of the kind of crushing poverty Americans cannot imagine. While trade should be carefully managed so that we limit social and environmental damage, it is improving countless lives. I have seen this first-hand in my travels and work in developing countries.

Until Washington decides to take a tougher and more proactive stand with regards to trade, the question still remains, what can we to do?

One answer is to promote those companies that are doing right by their workers, by, for example, paying them a living wage. While this may mean their products are not competitively priced as they do not externalize their costs on to you and I – as we have to pay more to cover the cost of Medicaid, which growing numbers of out of work or under-employed people have to turn to – many consumers who care about such issues are willing to pay more. In economic jargon, this is known as “willingness to pay.” A large number of Americans are willing to pay for products and services from socially- and environmentally-responsible companies. However, what companies like these need is an advocate to help level the playing field, by letting consumers know where they can choose to spend their money. That’s one of the things the Washington DC Sustainable Business Network aims to do – promote those companies that are doing the right thing.