The Business Ethics Blog

A couple of weeks ago, I asked Why the “C” in “CSR”? After all, not all companies are corporations, and most people interested in CSR seem really to be interested in the ethical responsibilities of companies quite generally.

Today’s question: Why the “S” in CSR? What’s so social about Corporate Social Responsibility? The short answer, presumably, is that CSR is intended to get managers to think not just about their responsibilities to shareholders, but to society more generally. Indeed, much of the debate over CSR has focused on whether managers are a) can (i.e., are they qualified to), and b) should (are they justified to), use shareholders’ resources to achieve social objectives.

But (echoing part of my point from 2 weeks ago) most CSR advocates don’t seem to want to define the scope of CSR narrowly: they generally want CSR to cover the full range of ethical issues in business, and perhaps even for CSR to supplant (or engulf) business ethics.

But it’s worth noting that many ethical issues in business simply can’t straightforwardly be cast in terms of social obligations. Here are three examples that come quickly to mind:

1) Responsibilities to employees. What are an employer’s responsibilities in terms of workplace health and safety? Whatever they are, surely they constitute a central ethical issue for businesses, and a crucial set of responsibilities. But in what sense are they “social?” The need to act responsibly toward employees is a good example of why “social” isn’t a good stand in for “beyond-shareholders.”

2) Environmental ethics. If you believe that the environment is important only because it’s useful to humans (the “anthropocentric” point of view), then it could make sense to think subsuming environmental issues under the heading “social responsibilities.” But if (as many people believe) the environment is important in its own right, independent of human needs (the “ecocentric” point of view) then environmental issues have to stand on their own, and the needs of ecosystems could in theory conflict with social needs.

3) Obligations to avoid Conflict of Interest. In business settings, conflict of interest arises when someone has a private or personal interest sufficient to appear to influence the objective exercise of his or her official duties. So, imagine you work in Human Resources for a major corporation. You’re involved in a hiring decision, and your sister is applying for the job. In order to avoid Conflict of Interest, you should not take part in the hiring process. That’s an obligation you owe to your employer — part of your obligation to make sure the best person is hired — and an obligation you owe to other job applicants, an obligation to make sure the hiring process gives everyone a fair chance. It’s not in any obvious way a “social” obligation.

Feel free to think up other examples.

Now, again, none of this is intended to say that corporations don’t have social obligations; nor is it an answer to (difficult) questions regarding what the extent of such obligations might be. I’m just pointing out that regardless of the answers to those questions, the notion of “social” obligations simply cannot capture most of what we think is ethically important in corporate behaviour.

One of the interesting developments in business ethics over the last few years is the proliferation of senior positions, at major corporations, with the word “ethics” in their titles. (The people filling those positions even have their own association: the Ethics & Compliance Officer Association.) One one hand, it’s good to see senior positions dedicated to ethics. On the other hand, the obvious risk is that ethics becomes ghettoized, relegated to one department that’s now expected to “take care of”, you know, “that ethics thing.”

Case in point: this story, from the Washington Post: Amid Reviews, DynCorp Bolsters Ethics Practices

DynCorp International, a major government security contractor, is strengthening its ethics practices in the wake of government investigations of its programs in Afghanistan and other conflict zones.
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In response to … incidents and because senior executives had been discussing such a move, DynCorp in May established a position of chief compliance officer with a specific focus on ethics, business conduct, related investigations and regulatory compliance, company spokesman Douglas Ebner said.

It’s certainly good to see a company with a billion-dollar-plus contract to train an entire nation’s police-force making a public commitment to acting ethically. That seems pretty important.

But, well, a couple of points. First, notice the reference to strengthening “ethics practices.” I don’t know if that phrase came from DynCorp itself, or is the journalist’s own turn of phrase, but it’s pretty cringe-worthy. Ethics is (very roughly) about figuring out the right thing to do, and ethical questions arise in all aspects of business. There are, I suppose, a few specific activities that can be thought of as especially ethics-related (such as training your staff about the corporate Code of Ethics). But is that really what the story is talking about? If DynCorp is really just talking about amending its policies and practices to make wrongdoing less likely, why not just say so?

See also this bit of ethics-slash-PR-speak from a company spokesman:

“We’re absolutely dedicated to a framework of governance and compliance that ensures a transparent and accountable business environment,” Ebner said. “Whether it’s misconduct, or public perception or allegations of misconduct, these can tarnish a company’s ability to work in challenging environments.”

Is anyone reassured by that? Should we be? As far as I can tell, the real message there is:

“Blah blah blah governance blah blah compliance blah blah blah transparent blah accountable….”

You can fill in just about any other words you want in between…it really doesn’t change the message. What matters from a PR point of view is the use of those key words. From an ethics point of view, all such a statement proves is that someone at DynCorp has done some basic homework on what the appropriate buzzwords are. But that, quite literally, is not saying much.

Interestingly, the article above doesn’t even mention DynCorp’s current Chief Compliance Officer, Curtis L. Schehr — who, for better or for worse, doesn’t have the word “ethics” in his title.

This is getting a bit crazy, don’t you think?

From The Guardian: Food products should carry ‘water footprint’ information, says report

Food and drink products should carry a new label to give consumers more information about their “water footprint” – the hidden amount of water used in the manufacturing process – two health and food lobby groups will recommend this week.

More transparency is needed about the huge volumes of water used to produce food, which most consumers are unaware of, said the joint report by the Food Ethics Council (FEC) and the health and food group Sustain.

It is calling for the proposed new label to reflect good practice, by taking into account the extent to which some companies and manufacturers are already working to use water in ways that are fair and environmentally sustainable….

Now, to be clear, I think water is very important. Clean, fresh water is critical for all life on this planet, and its continuing availability is in question. I also think consumer choice is important. Consumers understanding the products available to them, and choosing on that basis, is in fact fundamental to market capitalism.

But I’m increasingly skeptical that labelling products (especially food products) with everything that anyone thinks matters is the route to consumer empowerment. (My views on labelling GM foods, for example, are here.)

The basic problem is that “the market” is complex, as are consumers’ interests and desires. It’s far from clear what the best way is for consumers’ various interests to be accommodated (thinking both in terms of good outcomes, as well as in terms of other important values such as autonomy). It might be worth sketching a rough typology of options.

Option 1) Label everything in as much detail as possible. I suspect this is a bad option. I don’t think consumers are empowered by overloading them with information, particularly where that information consists in metrics that are the subject of disagreement among experts. (I can see it now. An ernest consumer approaches a shelver at the local grocery store and says, “I found the low-carbon-footprint, organic, shade-grown, FairTrade coffee, but I was looking for the low-carbon-footprint, low-water-footprint, organic, shade-grown, FairTrade coffee. Can you tell me where that is?”) It’s also worth mentioning that such labelling is likely to be disproportionately burdensome for small, local producers. How many small farmers know how many litres of water it takes to produce a pound of beef or a bushel of apples?

Option 2) Let the market handle it — in particular, let the market (subject to suitable taxes & regulations) determine how much of various scarce resources is consumed. Part of the reason a resource like water gets overconsumed is that it is either free or underpriced. If water was suitably priced, then as water prices climbed, the price of water-intensive foods would climb, and people would buy less of them. You wouldn’t need a ‘water footprint’ label, then; everything the consumer needed to know would be shown on the price tag. Similarly, as the price of oil climbs (as many people think inevitable) the price of goods made from petroleum will climb, and we’ll inevitably buy less of them.

Option 3) Let government handle it. This could be done in a variety of non-mutually-exclusive ways. With regard to water, government could alter the price of water (see #2 above) by taxing it. Or the government could tax companies that make water-intensive foods. Or they could simply ban certain kinds of foods on the grounds that they’re, e.g., water-wasteful.

Option 4) Educate consumers. If people had a better understanding of which kinds of products generally have which kinds of background characteristics (e.g., which ones take the most water or petroleum or whatever else to produce) then you wouldn’t need as much labelling on the product itself.

Option 5) Use admittedly-imperfect aggregate scoring systems. This apparently is what Walmart is up to with its forthcoming sustainability index. Of course, aggregating along even what is supposedly a single dimension (like sustainability) is hard and bound to raise controversies; aggregating along more than one dimension is fool’s gold. (How do you rate a product that is high-sustainability, but scores low in terms of human rights? Trying to do so amounts to a version of the ‘triple bottom line’ fallacy.)

Of course, what we’re likely to end up with is a mish-mash of the above options. Governments will ban or tax the hell out of some disfavoured products. They’ll require labelling of some product characteristics they see as particularly useful to know about (for food: ingredients, basic nutritional info, etc.) Governments & activists will also do what they can to educate consumers. And a few single-issue labelling regimes will capture the hearts and minds of a handful of well-intentioned single-issue consumers. The big prize goes to whomever can figure out a compelling general argument for what combination of mechanisms fits what categories of consumer goods.

From the National Post: Toyota slams Ontario’s plan to jolt hybrid sales

Toyota Motor Corp. is raising concerns over the Ontario government’s plan to offer rebates of up to $10,000 to people who buy plug-in hybrid and battery electric vehicles, saying the move looks like a deliberate ploy to help General Motors Co. — of which the provincial and federal governments are now minority shareholders….

(Now, to clarify: Toyota does make hybrid cars, but they’re behind GM in the specific kind of hybrid that the Ontario government is favouring.)

Basically, the accusation is that the government of Ontario is in a conflict of interest — and evidence of that conflict is to be seen in the government’s decision to favour one technology over another, with differential impact on auto-makers, including the one it now has a stake in. In essence, the Ontario government (and, through it, Ontario taxpayers) are now shareholders in GM, and are hence now in competition with shareholders of other companies.

Of course, there’s room for broader criticism. According to one industry analyst (Dennis DesRosiers) cited in the Post story:

A cynic would say this is just government subsidizing a product that is produced by a company they own. I think that is a bit too cynical. I just think it is bad policy from a variety of perspectives.

Perhaps what Mr. DesRosier has in mind is a worry (voiced by many already with regard to the auto-industry bailout) about government’s involvement in private industry. One relevant sub-set of such worries has to do with government attempting to influence decisions — including decisions about competing novel technologies — better left to the market. Not that there’s necessarily anything wrong with government promoting socially-beneficial technological change, but in the present case, it’s not clear that it’s time to declare one particular sub-type of hybrid best in that regard.

(p.s. On the issue of government involvement in industry, I found the following scholarly paper tremendously useful. It’s closely related to the topic at hand: Stakeholder Theory, Corporate Governance and Public Management: What can the History of State-Run Enterprises Teach us in the Post-Enron era? by Joseph Heath and Wayne Norman)

A few people have asked me what I thought about the Pope’s recent Encyclical touching on business ethics, “Caritas in Veritate” (Charity in Truth).

Well, in truth, I haven’t read it. And I probably won’t get around to it. I’m relying on second-hand news sources, such as this piece from the Globe and Mail: Pope denounces profits at all costs. Based on those reports, the Pope’s essay seems a mixed bag. “Profit is useful if it serves as a means toward an end” — that’s a good bit. The globalized economy has “lifted billions of people out of misery” — also a good bit. “The economy needs…an ethics which is people centred” — not sure what he thinks the alternative is, but OK. “[P]eople from developed countries… have benefited more from the liberalization that has occurred in the mobility of capital and labour…” — I’m pretty sure that’s empirically false, if we’re talking relative benefit, but at very least it’s unsupported in the Encyclical itself (would it kill him to cite data?)

But really, my main reason not to bother with the Pope’s new essay — with all due respect to my friends among the several hundred million Catholics in the world — is that he’s writing from a particularly isolated sub-branch of one moral tradition, and the Pope’s particular train of thought is one that doesn’t seem interested in engaging with the broader conversation over the appropriate role of business in the world. Want proof? Check out the footnotes at the end of “Caritas in Veritate”. 159 footnotes, and not a single one refers to any modern scholar in business ethics or any cognate discipline. Not even to any of the many fine Catholic scholars in that field. The only footnote that isn’t to either the Pope himself, or to some past Pope, is a trivial footnote to the ancient, Pre-Socratic Greek philosopher Heraclitus. Why would I, or anyone else not especially fascinated by Catholic teachings, bother to pay attention?

“CSR” stands for “Corporate Social Responsibility.” Just what “Corporate Social Responsibility” itself means is subject to more than a little debate within CSR circles. There’s no clear definition, though there seems to be rough agreement that it has something to do with corporations, and their social responsibilities.

(I’ve blogged before about problems with CSR: Down With CSR! Up With Business Ethics!)

Today’s question: Why is there a “C” in “CSR?” That is, why is CSR about specifically Corporate social responsibilities? To see why the “C” is odd, it’s important to note that not all businesses are corporations, and that at least some (maybe not all) CSR advocates define CSR in such a way that it at least seems relevant to all commercial organizations. (At least one CSR textbook goes so far as to define “business ethics” as a sub-topic within CSR.) Certainly lots of CSR advocates take the term to be at least roughly equivalent to, and perhaps a superior replacement for, the term “business ethics.” So why the focus on corporations in particular, rather than businesses in general?

Some possible answers:

1) Corporations have unique social responsibilities, ones that make it worth singling them out. Well, corporations do have some special characteristics (aggregation of labour & capital; separation of ownership & management; limited liability, etc.), but none of them is unique to corporations.

2) All the biggest, most important companies are corporations. That’s false. The accounting firm Ernst & Young, for example, is one of the biggest companies in the U.S., and it’s not a corporation. It’s a Limited Liability Partnership. Trusts and co-operatives can also be pretty big and pretty important commercial entities. Presumably they have social responsibilities too.

3) The word “corporate” in “CSR” doesn’t refer to Corporations in the narrow legal sense of a business corporation — it refers to the more general idea of a ‘corporate’ entity, a collective which may-or-may-not be involved in commerce. That makes some sense, technically. But in actual usage the term “CSR” is only used to refer to business corporations — not other ‘corporate’ entities such as clubs and charities.

4) Its just a term of convenience. The name doesn’t matter. When we say ‘corporate’ we mean ‘company.’ Well, OK. I have some sympathy for shorthand. But for people who are supposed to be experts, papering over an important distinction seems odd — especially when the details so often do matter, when it comes to attributing responsibilities.

If anyone has a better answer to why there’s a “C” in “CSR,” I’d be happy to hear it.

Regulate yoga? Oh my, they want to regulate yoga? How could anyone want to impose rules and regulations on something as lovely and groovy as…yoga?

From the New York Times: Yoga Faces Regulation, and Firmly Pushes Back

Citing laws that govern vocational schools, like those for hairdressers and truck drivers, regulators have begun to require licenses for yoga schools that train instructors, with all the fees, inspections and paperwork that entails. While confrontations have played out differently in different states, threats of shutdowns and fines have, in some cases, been met with accusations of power grabs and religious infringement — disputes that seem far removed from the meditative world yoga calls to mind….

The rationale for regulation? Well, ostensibly, it’s consumer protection:

Regulators said licensing the schools would allow states to enforce basic standards and protect customers who usually spend $2,000 to $5,000 on training courses, not to mention provide revenue for cash-starved governments. “If you’re going to start a school and take people’s money, you should play by a set of rules…”

Now at least some of the opposition to regulation is off-base. The notion of “forcing [an] ancient tradition to conform to Western business practices” isn’t silly at all if by “Western business practices” you mean record-keeping and assuring customers of quality and if that ancient tradition is being used as a way to make money.

The “playing by a set of rules” thing sounds great — except that, as businesses, yoga schools are of course already bound by a set of rules, namely the set of rules that govern commercial transactions more generally. The question at hand is whether you need a regulatory structure specific to yoga. On that matter, the NYT story isn’t all that helpful (i.e., the people interviewed for the story aren’t that helpful). I’m a big fan of regulation where it serves to protect customers. But in all but the most dangerous of situations, I’m also a fan of waiting to see a problem actually happen, before leaping in to fix it.
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Thanks to Wn for this story.

I took this picture at my cozy neighbourhood Starbucks yesterday:

The poster advertises the company’s “10-year partnership with Conservation International to make the world a better place for coffee farmers — and everyone else.”

But what struck me was the “Everything we do, you do” part. On one hand, it’s a cute little bit of feel-good advertising. (“Wow, by spending $5 for a fancy coffee, I’m making the world a better place!) On the other hand, it’s an interesting point about the metaphysics of corporations. Now, I don’t buy the idea that corporations are merely legal fictions, incapable of intending things, taking action, being responsible for things, and so on. But there’s a perfectly good sense in which the corporation’s actions do depend quite crucially on the actions of various human beings, and that includes managers, employees, shareholders and, yes, customers. Everything Starbucks does is funded by sales of coffee (etc.). So everything they do does depend on its customers. Of course, customers aren’t directly responsible for any particular action by the company. So, question: what actions — good or bad — can sensibly be attributed, in some sense, to a company’s customers? And are all customers equal in that regard?

From Reuters: UK shoppers want ethical food without paying more

They want ethical food, but don’t want to pay more. My, that is news. I guess shoppers in the UK are unlike the rest of us, who prefer unethical food and want to pay more for it.

Anyway, here’s the first bit of the story:

Britons have an appetite for ethical food, but as the recession bites shoppers are anxious to spend less.

Sales of ethical food, such as organic produce grown without chemicals, and Fairtrade products for which farmers in poor countries are paid more to help improve living standards, are both slowing.

“There is a huge propensity for people wanting things to be done in an ethical manner,” said Jonathan Banks, U.K.-based business insight director with market research firm the Nielsen Company.

“But they are not going to make repeat purchases on something that is not good value for money,” he said…

OK, funny headline aside, there’s plenty of interesting stuff, here.

First, there’s the oddness of the term “ethical food.” The article gives examples: organic produce, fair trade products, etc. (Presumably the list would include things like low-carbon-footprint food, union-made food, shade-grown coffee, etc.) Is each of those characteristics, on its own, sufficient to call food “ethical?” (I’ve blogged about this problem before: “Organic:” Not Synonymous With “Ethical”.) What about food priced low enough that a working-class family can buy it and still afford health insurance? Is that “ethical” food, too?

Second, there’s the fact that — my joke aside — some people really do want to pay more. Purveyors of various fair-trade (not necessarily just FairTrade) products do their best to convince customers voluntarily to pay more for products (such as coffee). It’s not just that such customers are willing to pay more; they’re volunteering to. (See also this new book: Cheap: The High Cost of Discount Culture, by Ellen Ruppel Shell, which I haven’t read yet.)

Finally, there’s the hard problem of how to translate even widespread concern for X into collective action on X. It’s relatively easy to get people to say they prefer to buy food with various ethical characteristics. But (even setting aside controversy over what counts as ethical food) it’s harder to get people to act on that preference. First, in many cases there’s the sense that individual choices don’t matter much; in others, there’s the sense that they don’t matter at all. It’s hard to motivate people under such circumstances, even if they want to do the right thing. Add onto that the issue of price, and it’s tempting for each of us to go for the cheap option, and let everyone else save the world. Of course, if enough of us think that way, the world just doesn’t get saved, even though we all want it to. (See also the “problem of collective action in the provision of public goods.”)

Money can’t buy love, but can it buy a conscience?

According to the Wall Street Journal, furs aren’t the only environmentally friendly (?) luxury good. Here’s the story:
Luxury-Goods Makers Brandish Green Credentials

The bad economy and a fundamental shift in the market for luxury goods are forcing an industry that reveres names like Chanel and Versace to embrace a different icon: Mother Nature.

Over the past year, many of the world’s best-known luxury labels have started to introduce ecofriendly products, snap up brands that tout their social responsibility and weave environmental themes into their advertising and marketing. In May, French luxury conglomerate LVMH Moët Hennessy Louis Vuitton took a stake in Edun, an organic-clothing company founded by the singer Bono and his wife.

Other companies have begun to advertise steps they took years ago to promote resource conservation. This summer, the windows of Tiffany & Co.’s retail stores world-wide feature images of coral reefs, publicizing Tiffany’s commitment since 2002 not to use coral in its designs….

I suspect many people’s reaction, here, will be similar to their reaction to the reaction to (Product) Red. Is this really supposed to do some good for the world, or is it just a way to make people feel better about rampant consumerism? Is this just high-end greenwashing?

I think we can usefully tease apart two questions here. First, what’s the motive behind the greening of luxury brands? And second, what will be the effect? As to the first question: well, who knows? We can make assumptions, but that doesn’t seem useful, except to the extent that we think the answer to the first question tells us something about the answer to the second. So, what will be the effect of greener luxury goods? A few points:

1) There’s been talk lately about how going green is itself a luxury: what people want during a recession is cheap goods, whether or not they are the most environmentally friendly products available. That probably doesn’t apply, though, to a $700 Louis Vuitton handbag. If the eco-conscious version happens to cost a few bucks more, the fashionista is unlikely to care.

2) On the other hand, the market for luxury goods is a tiny market. So how much effect can greening it really have?

3) In terms of promoting environmentalism as a trend, the greening of luxury brands has to be a good thing. After all, there are plenty of people out there who will follow faithfully whatever example Jennifer Aniston sets.

4) It’s also worth considering that environmental promises made by high-end brands may be among the most reliable such promises out there. They’ve presumably got the resources required to do very careful sourcing, in order to make sure that the organic, low-carbon, union-made, fair-trade cotton that goes into their $200 t-shirts really is what it claims to be. And furthermore, these brands also have plenty to lose if they don’t live up to their eco-rhetoric.