Wednesday, November 9, 2011

Breaking the Matrix, Part Two: A Strategic Fit among the Needs and Goals of Business, Society, and the Environment

     (In Part One of this series of articles, I pointed out the folly of the false divide between environmentalists and business advocates. In Part Two, I will show that meeting business needs, environmental needs, jobs, and other social needs don’t have to be zero-sum “trade offs.” Through issue sets analyses, all of these needs and goals can be fitted to the benefit of all concerned.)
     I wish I could tell you that Corporate Social Responsibility (CSR) necessarily leads to higher profits. The fact of the matter is, absolutely nothing necessarily leads to higher profits, and CSR is no exception.
     Some of y’all, in the back of your heads, may be thinking of Milton Friedman’s 1970 article claiming that CSR is a betrayal of business stakeholders. His line of reasoning ran that 1.) investors, shareholders, creditors, and others have placed their money into the hands of business managers with the understanding that those managers would do their best to maximize their investments, that 2.) CSR loses money for the business and its financial stakeholders; therefore 3.) CSR is a betrayal of trust.
     Friedman’s article, “The Social Responsibility of Business is to Increase its Profits,” is worth reading in full. I have read and studied it several times.  

     Doctor Friedman received a Nobel Prize for economics—not business management. While there is some overlap between business, economics, and finance, the three are as different as television, movies, and theater. Naomi Klein, in her book Shock Doctrine, described what happened when Friedman's ideas were tried out in the real world.  There's many a slip between the cup and the lip.  Slips are more disastrous between the academic and the politician.
     If there were a Nobel Prize for business management, three (or four) of the recipients should be Michael Porter (possibly sharing it with Mark Kramer), and (shared) William McDonough and Michael Braungart. In this article, I’ll tell why.
     Doctor Porter asserts that most CSR initiatives are wasted and even counterproductive because they’re just add-ons and not part of a seriously considered business strategy. In several articles, probably the best known of which is “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” Porter and Kramer tell us that the wisest CSR strategy involves a strategic fit among business needs and goals, societal needs, and goals, and the demands of CSR concepts.
     As an example, they describe something that Nestle did right in Africa. (Porter and Kramer didn’t mention what Nestle did wrong in Africa; in this article, I won’t either.) In a cattle-growing area, they brought in veterinarians and refrigeration, and they brought about improved roads. As a result, cattle and their farmers produced higher quality milk with less spoilage and a much higher profit to the farmers. Nestle, in turn, generated reliable sources of high quality milk. (For a PDF of their article, click here.)  
     We hear all the time that business practices should be “sustainable,” and that’s true as far as it goes. From my studies into business administration and my research for my doctoral dissertation, Monitoring Corporate Social Responsibility, I’ve concluded that CSR strategies must also be sustainable. Just as business practices become more sustainable by fitting them to CSR requirements, I’ve concluded that the CSR strategies must become more sustainable by fitting them to the needs and goals of business and society.
     Earlier in this article, I used the term “issue sets analysis.” The concept is simple; applying it  can be complex.  Everybody needs and wants certain things. An issue sets analysis involves determining what each party needs and devising a strategy that will bring about a win-win situation.
     A few years ago, people in my area were at odds over a proposed bicycle path. Bicyclists, casual nature lovers, and government leaders were for it, for obvious reasons. Environmentalists, aborigines, and communities along the proposed route were against it. Aborigines were against it because they lived along the flood plain and the government ordered them to leave to make way for the path. Communities hated paying taxes to build the path when there were few off ramps leading to their communities.
     The first three groups were given all they wanted, the environmentalists and communities were given some of what they wanted, and the aborigines—well, their story can be read by clicking here for “Formosa Betrayed Again,” and here for “Formosa Aborigines Betrayed Again.” In addition to describing aboriginal suffering and the arrogance of their conquerors, you can see how strategic fit among issue sets has enjoyed some measure of success. 
     William McDonough (American architect) and Michael Braungart (German chemist) carry CSR strategy a quantum leap beyond Porter and Kramer. I take it you've heard politicians speak of cradle-to-grave business concepts. Well, that’s old hat. With McDonough and Braungart, it’s a life-cycle analysis resulting in cradle-to-cradle (C2C) design. It involves business models that imitate nature; nature wastes nothing. (here)
     Most businessmen know that they can maximize profits by decreasing waste. Most environmentalists know that waste is pollution. I’m sure you can see the fit.
      In 1991, a Swiss textile concern hired McDonough and Braungart to come up with clothing "safe enough to eat."  They tested 3,000 chemicals commonly used to produce clothing and found that only 36 were that safe.  With just 36 chemicals, the company could produce clothing in any color except black.  Here's a quote: "The result was a 30% increase in total output, a drastic reduction in costs, and the production of the first 100% biodegradable commercial fabric."  What's more, the water flowing from the textile plant was cleaner than the water flowing in from the town's drinking water supply.  Click here for the story.
     In Part Three of this series, I’ll address things that many businesses and individuals do to increase benefits to themselves while practicing social and environmental responsibility. Though you have already heard of some, you’ll hear of loop closing, new service economy, downcycling, upcycling, reuse, waste hierarchy, trashion, and even dumpster diving.
     Contrary to what the TV advertisements suggest, we can live healthier, happier, cleaner, more frugally, and more prosperously—all at the same time. Oh, and for what it’s worth, by doing all this, we can enjoy more freedom from the banksters and other malefactors of great wealth.  It'll give them hives.

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