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BUILDING THE RESPONSIBLE ENTERPRISE

Stanford University Press

Contents

Preface............................................................................................viiAcknowledgments....................................................................................ixChapter 1 Responsible Enterprise: A Systems Perspective............................................1Chapter 2 In Search of Balance: Business, Politics, Civil Society, and Nature.....................20Chapter 3 The Role of Personal and Organizational Vision...........................................55Chapter 4 Values in Management Practice: Operating with Integrity..................................81Chapter 5 Value Added: The Impact of Vision and Values.............................................107Chapter 6 Stakeholders: The Relationship Key.......................................................131Chapter 7 Managing for Responsibility..............................................................169Chapter 8 Assessing Responsible Enterprise.........................................................188Chapter 9 Sustainability and the Global Village....................................................222Chapter 10 Responsibility Initiatives and Guidance Documents.......................................243Chapter 11 Scanning the Future: Finding Pattern in Chaos...........................................271Chapter 12 Value Added for the Global Future.......................................................293Notes..............................................................................................311Index..............................................................................................351

Chapter One

A Systems Perspective

We have to choose between a global market driven only by calculations of short-term profit, and one which has a human face. Between a world which condemns a quarter of the human race to starvation and squalor, and one which offers everyone at least a chance of prosperity, in a healthy environment. Between a selfish free-for-all in which we ignore the fate of the losers, and a culture in which the strong and successful accept their responsibilities, showing global vision and leadership. Kofi Annan, former Secretary-General of the United Nations, in a speech at the World Economic Forum, 19991

CORPORATE RESPONSIBILITY FOR SUSTAINABLE ENTERPRISE

The speech by former United Nations Secretary-General Kofi Annan quoted in the epigraph above sparked a firestorm of interest among executives in attendance. Only one year later the United Nations launched the UN Global Compact as a formal organization. By its tenth anniversary in 2010, the UN Global Compact was by far the world's largest corporate responsibility initiative, with over 8,600 signatories, 6,200 of which were businesses, including many transnational corporations. Annan's words highlight an important and often forgotten reality: business is integrally connected to both the social and ecological contexts in which it operates.

With his statement, Annan signaled new recognition of an important shift in the long-term relationships that businesses can expect to have with their many constituencies—their stakeholders—and with how they treat the natural environment. As businesses have grown larger and more powerful, their attendant duty to be responsible wherever they operate has also grown. Indeed, some argue that the rise of the very term corporate responsibility since the late 1990s came about in part because some companies in the process of globalization began to assume responsibilities formerly assigned solely to governments. Today, expectations that businesses will play constructive and responsible roles in creating an equitable and sustainable society are further enhanced by worries about global climate change, the economic meltdown of 2008 and its ensuing social problems, and the continuing gap between rich and poor, North and South.

Consider the following: during the first ten years of the 21st century, the world was faced with a series of major business scandals and ethical abuses, including the collapse of Enron, a global financial crisis resulting from an increasingly dominant financial services industry that acted more like a gambling casino than your neighborhood banker, a collapsing housing market resulting from deceptive and problematic mortgage lending practices, and the recognition that climate change and a sustainability crisis were no longer impending but in fact present. The gap between rich and poor globally grew wider, in some places resulting in revolution, and in others leaving billions of people to subsist in grinding poverty. Ecologists note that all major ecological systems are in decline—with overfishing, erosion of topsoil, desertification, clear-cutting of forests for timber, burning of rainforests for grazing and cropland, fertilizer polluting rivers, streams, and lakes, and species extinction at an unprecedented rate being only a few of the many ecological problems facing the planet.

Despite the Millennium Development Goals (MDGs) proffered by the United Nations with the intent of reducing poverty, increasing education, and enhancing sustainability in the world, nearly 3 billion of the 7 billion people in the world still live on less than $2.50 a day, 1.1 billion do not have clean water to drink or cook with, and 2.4 billion people have no sanitation facilities. Trust in business, according to many surveys, is at an all-time low—with other institutions not faring much better. The world's public authorities seem unable to move effectively to deal with the sustainability and climate change crises. Businesses are oriented toward short-term maximization of shareholder wealth. "Free"-market ideology has taken its toll on many nations and communities, which have lost jobs and the capacity to be self-sustaining as they tried to enter the global economy. The litany could go on, but is it any wonder that some people doubt that it is even possible for business to be responsible in this context?

Calls for greater business and corporate responsibility—that is, more responsible enterprise: greater accountability, responsibility, transparency, and sustainability—from all types of enterprise are commonplace. Many companies have, in fact, developed significant initiatives around corporate "social" responsibility, which we define as explicit pro-social initiatives on the part of companies. Others have developed major sustainability initiatives or characterize their efforts as corporate responsibility, implying that they are attempting to be accountable, responsible, transparent, and sustainable in their business models and practices. We will say more about these ideas later, but the point is that there is a great deal of activity around responsible enterprise within companies—but still not enough to restore the public trust in business enterprise. Still not enough to ensure that there will be sufficient change to the system to guarantee necessary husbanding of planetary resources, care with social and human "resources," or safeguarding of financial resources.

With this book we offer a roadmap for those who wish to follow the path of responsible and sustainable enterprise; we provide frameworks and arguments for why doing so is not only good business but an imperative...