“Businesses Cannot Afford to Ignore Social Issues”

I have recently added Innovations in Emerging Markets blog and they tend to have few decent posts about trends in business practices (focus on India tends to be more frequent too). Their latest post on relationship between businesses and social issues (the title is borrowed from the original post) is something that I closely identify with in forming my opinion regards role of businesses within a society. The pure and often theoretical assumption that businesses often operate on basis of profits and maximum efficiency begs for revision in today’s changing times. Public relations have often sunk a company almost like a baseless rumor crashes its stock. Businesses are getting smarter and have begun identifying an awareness of social and political trends. Not everything is weighed in terms of profit. The blog mentions this particular paragraph that appeared in the current edition of the McKinsey Quarterly that embodies the basic argument:

“For stakeholders, companies are, in many ways, already agents of social change and must become much more deliberate in understanding the way they affect society. Businesses that …. proactively understand and engage with social issues will benefit most. They will be better able to shape the social contract and to identify ways of creating value from the opportunities and risks arising from sociopolitical issues.”

True.

Tweet This““Businesses Cannot Afford to Ignore Social Issues”” [Short URL: http://www.ipatrix.com/?p=1273] was published Thursday, April 20th, 2006 at 9:11 pm by Patrix, filed under Business, Society Culture. Both comments and linkbacks are closed.

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  • http://www.retributions.wordpress.com confused

    How do you define social resposniblity for a business?

    In current context-Reservations or affirmative action or none?

  • http://ipatrix.com Patrix

    Confused, I would definitely argue for Affirmative Action (in part) because it places the onus on the business to fulfill its “social obligation”. It can choose not to but then it exposes itself to criticisms by its consumers who inherently believe in social responsibility. I know it can be difficult to define specifically what social responsibility is and it is actually more a question of value than logic or legal judgment. This can be as intangible as it can get.

    What do you think?

  • http://www.retributions.wordpress.com confused

    First, I must admit I had two beers, so I might not make much sense. :)

    Firstly , I firmly believe that companies are in the business of making money and that should be respected. If it does not make profits, the possibility of it fulfilling any social obligations does not arise. Secondly, in the modern world, with communications and image being such a big issues, in many cases a company will follow social obligations by itself beause it is beneficial for it. It helps it for example to broaden it customer base.

    I would say that social obligations fall into two clases. The first would be the tangibles-envoironment. A businees must be forced to bear the costs of envoironmental degradation because otherwise the society pays the cost of the same. I was reading in NYT recently how low goas prices in this country have resulted in larger and faster cars over the last two decades and not more fuel efficient ones. Thus, social obligation in this area should be enforced-if a company wants to go beyond the minimum-more power to it.

    Secondly, are the intangibles-affirmative action for example. A company should ideally pursue affirmative action but it should not be enforced by the law. Its a choice of the company concerned and if it values a varied customer base, it probably will. I admit that it can be argued that there are detrimental effects of not having affirmative action-increased social tensions for example. However, in this case I would give the benefit of doubt to the company.

    Time for the third beer now ;)

  • http://ipatrix.com Patrix

    Confused, I haven’t had any beers today but I couldn’t have said it better myself. And as I said, since it is value-based, I would be (personally speaking) be more inclined toward a company that defers to a social cause whatever its reasons might be. However that said, there is also enough reason for a company to discriminate against certain causes as there are reasons for them not to. And both such reasons are not necessarily based in reason or profit motivations. That is why “irrational prejudice” is a term that does exist in this world.

  • http://jdv.blogspot.com :-)

    Confused: Dude, you are not as confused as you sound. I think you are dead right.

    Whatever is tangible must be enforced. The rest must be left to the dynamics of free markets. (A good example is the recent Hutch ad campaign about cell phone etiquette).

    Ideally, a business is all about creating a ‘surplus’. Thats how they should remain. Also in the new evolving global context, ‘Social Issues’ and ‘values’ can NOT be defined because the boundaries are blurring.

    May be someone like Patrix should come up with new term like ‘Glocal Values and Glocal Issues’. In the Glocal scenario, even the tangible enforcements might backfire. Just imagine Chevron taking over Ford or Major stakes in Ford being taken over by Saudis.

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