Less  than  a  year  ago  in Te Miami Herald, Henry Miller wrote, “Businesses do not have  social  responsibilities; only people do.”1 Te Economist  also  recently  offered  a  skeptical  view  of  corporate benevolence; the feature article in the January 22, 2005 issue criti-cizes companies contributing to the tsunami relief effort for spend-ing “other people’s money” and concludes, “All things considered, there is much to be said for leaving social and economic policy to governments.”

2     Te rejection of a “social conscience of business” is nothing new; in fact, the sentiment dates back to at least 1970 when Milton Friedman declared, “Tere  is one and only one so-cial responsibility of business—to use its resources and engage in activities designed to increase its profits.” But what happens when governments fail in the arena of social and economic policy? And where do companies who believe in the philosophy of “doing well by doing good” fit into the picture?While  groups  like Business  for Social Responsibility  (BSR) tirelessly promote the value added from socially responsible behav-ior, scholars and practitioners debate whether increasing expendi-tures on social or environmental obligations can boost the bottom line. For example, while Michael Porter and Class van der Linde believe  that  strict  #p#分页标题#e#environmental  regulations  can  stimulate  innovation and enhance competitiveness, others dismiss the possibility of “virtually costless  environmental  regulation”  and  argue  that  increasing  the  strin-gency of environmental laws necessarily results in reduced profits for the firm.”

3  Te ongoing philosophical debate and contradictory anecdotal evi-dence require explanations  for  the varying relationships between social responsibility and profit that could have profound impacts on the struc-ture of government policies toward corporate social responsibility (CSR). As thousands of CEOs worldwide make substantial investments in their workforces, their communities, and the environment, it is important that we understand  the perceptions  that executives have of  the  relationship between their firms’ social and financial goals. Interviews with corporate executives and case studies reveal three models of thinking about CSR, though firm decisions are often based on some combination of the mod-els. While  these models do not offer one “right” way  to  conceptualize CSR, they do provide a framework for considerations about public policy and the future of socially responsible business behavior. Te three models offer policymakers a more effective way of organizing thinking about the often elusive and multifaceted concept of CSR.

 MODEL ONE:  THE TRADITIONAL CONFLICT  In  the  traditional neoclassical model,  tradeoffs between  #p#分页标题#e#social  and  en-vironmental goals  and profits  are  inevitable. Since firms only  consider private marginal costs when making production decisions, firms overpro-duce products or services, and operate at less than the socially optimum market equilibrium when  social costs exceed firms’ private costs. Tese decisions  create negative  externalities  and  require  government policies or other market-correcting interventions to restore the socially optimal equilibrium.

 Consistent  with  Friedman’s  views,  private  expenditures  on  envi-ronmental or  social objectives  represent dollars  stolen  from  either  em-ployees or stockholders. More stringent environmental protections limit firms’ ability to use “free” receptacles—such as rivers, open land, and the air—for  their production waste. Many  companies  rely on  a  strategy of “built-in obsolescence,” thereby increasing production inefficiencies (e.g. pollution)  and  adding  to  the  growing piles  #p#分页标题#e#of  junk  in  landfills. As Te Economist points out, donations of time or money to natural disaster vic-tims or  impoverished communities  represent dollars  stolen  from equity owners. Firms with this mindset consider only short-run private costs and benefits, leading them to overproduce public bads and undervalue socially beneficial decisions.Te  view  of  social  responsibility  and  profits  as mutually  exclusive objectives has been well documented.

 In Cradle  to Cradle, McDonough and Braungart define the longstanding problem: “We are accustomed to thinking of industry and the environment as being at odds with each oth-er, because conventional methods of extraction, manufacture, and disposal are destructive to the natural world. Environmentalists often characterize business as bad and industry itself (and the growth it demands) as inevita-bly destructive. On the other hand, industrialists often view environmen-talism as an obstacle  to production and growth....  It appears  these  two systems cannot thrive in the same world.”

4 Indigo  Teiwes,  Research  Analyst  for  the  Portland-based  socially responsible  investment  fund Portfolio 21, believes a majority of  today’s firms follow this ideology.       #p#分页标题#e#She cites the example of Scottish and South-ern Energy, a firm  she  initially considered a great potential  investment. Seeking to diversify its mix of generation plants to increase capacity and boost  earnings,  the  company made  a  strategic business decision  to buy two coal-fired power stations  in July 2004.      

  Te acquisition of the coal plants, which represent two of the United Kingdom’s top four worst coal-fired stations with respect to greenhouse gas emissions,   represents a clear conflict between financial gains and environmental integrity.When business  externalities  create  social  and  environmental prob-lems,  traditional market-correction  policies may  be  necessary.  In  Cor-porate Responsibility  in  the Global Village: Te Role of Public Policy, Susan Ariel Aaronson  and  James T. Reeves  explain,  “Although market  forces are increasingly pressing companies to act responsibly, markets have not succeeded  in prodding  corporations  to  ‘do  the  right  thing’  everywhere they operate. To some degree, public policies to promote CSR arise from market failures.”#p#分页标题#e#

8  To encourage socially responsible behavior the govern-ment should give  tax breaks or rebates  to companies  that meet certain requirements, give out awards or recognition for good behavior, and the development of social or eco-labels that companies can obtain by meet-ing  relevant  standards. Legislation  to  encourage particular  components of  corporate  responsibility  can  take many  forms,  from minimum-wage laws to command-and-control strategies to reduce pollution. While Dan Bross, Microsoft’s Director of Community Outreach, believes competi-tion brings about better  results  than government  regulation and claims that  “firms  bristle  at more  government mandates,”9    other  companies, such  as  the  energy  provider  PacifiCorp,  prefer  the  clear messages  and straightforward detail  that mandatory  requirements provide.   

    Regard-less of whether governments  impose harsher regulations or create more incentives to spur voluntary business programs to solve social and envi-ronmental problems, outside#p#分页标题#e#  forces  are necessary  to  restore  the  socially optimal market  equilibrium when firms  view other  societal goals  as  an impediment to profit-seeking.MODEL TWO: CORPORATE SOCIAL RESPONSIBILITY BRINGS IN THE CASHWhile the traditional view of conflict between industrial and social goals is far from obsolete, many companies are redefining the relationship be-tween financial, social, and environmental performance. Executives from these companies view environmental integrity and healthy communities as means to achieve greater profits. Model two represents the ideology of the majority of companies  that make  it  into socially responsible  invest-ment (SRI) portfolios.Tese  companies  choose  to  be  socially  responsible  for  a  variety  of profit-oriented  reasons:  increased  sales,  greater  innovation,  decreased production  inefficiencies,  decreased  future  risks,  and  greater  access  to capital. Many indicators suggest that 21st century businesses view social and  environmental  excellence  as  strategic  business  tools:  #p#分页标题#e#from  1995  to 2003, assets put into in social investments grew 40 percent faster than all professionally managed  investment assets  in the United States.  In re-sponse, companies are developing CSR departments, rewriting their mis-sion statements to include ethical goals, and developing codes of conduct that extend to employees and contractors worldwide, to the point that by the end of 2003, more than 2,000 companies had issued CSR reports.    

 While publicly held  companies  are  still  slaves  to  the numbers on  their quarterly SEC filings, many have found ways to turn social responsibility into economic success.One major reason CSR is on the rise is that executives believe it can help them attract new customers or boost sales. Whether they use CSR as a  strategic marketing  tool  to capture a niche market or believe  their good works will be recognized and rewarded later, CEOs often cite repu-tation as  their most valuable  intangible asset.    Kara Hartnett of BSR explains, “Brand differentiation is important for known companies. Social responsibility can set  them apart.”14   

 Companies with direct consumer interaction want a reputation for good corporate citizenship, though their definitions of citizenship vary. US Bank tracks the number of Community Reinvestment Act  (CRA)  accounts  opened  and  tries  to  #p#分页标题#e#quantify  gainfrom investing in disenfranchised segments of the population. While USBank does not specifically market its community outreach, executive Lin-da Wright asserts that, “when you give back to the community, it comeback  to you. Accounts have been opened with US Bank because of  therespect people have for the company.”15  At Microsoft, where CSR is “alabout  the bottom  line,”  the company places emphasis on achieving  thegreatest market  share  possible  and  becoming  a market  leader.    

  Real-izing the number of potential Xbox customers concerned about labor andenvironmental issues, Microsoft decided to push compliance with vendocodes and reexamine the environmental rules of the countries where theimanufacturers are located.  In addition to helping businesses that sell directly to consumers, CSRcan  also  increase  demand  for  business-to-business  transactions. WhileLevi’s has found that vendors are resistant to embrace  its codes of con-duct, the demand from purchasers for safe, healthy, and compliant facto-ries has created a new marketing strategy for many offshore productionsites. According  to Levi’s  executive Suzanne Beck, many  factories nowtout  their “Levi’s certification”  to attract contracts with other big namepurchasers.    www.ukthesis.org

CSR programs also build connections within the community. Dun-can Wyse, President of the Oregon Business Council, explains, “A lot obusiness is connections. Companies are not islands, they are not isolatedfrom the world; their business depends on their engagement in networksWhen a company strengthens its relationship with the community, this ipart of its mission.”18#p#分页标题#e#  In “Te Business Case for Corporate Citizenship,Arthur D. Little elaborates, “Te perceptions  that  stakeholders have oa  company’s  corporate  citizenship performance  can  significantly  affecthe business’s  license  to operate. Companies with a poor  reputation  inthis area can find themselves continually responding to criticism of theiapproach to a whole range of environmental and social issues.”19  Com-munity involvement and activism help companies garner the good will opoliticians and regulators in ways that may help the business later.Model  two  businesses  believe  that  by  enhancing  their  reputationthey also bolster recruitment and retention of quality employees. Numer-ous psychological studies have found that job satisfaction correlates withgreater commitment to a company and greater business success.

 A 2004survey  reveals  that more  than  three-fourths of MBA  graduates wouldforgo financial benefits to work for an organization with a better reputa-tion CSR and ethics.     In fact, the business case between CSR and hu-man resources is often so clear that many companies fail to acknowledge excellent treatment of employees as a social responsibility. When asked about the company’s high wages and presence at community events, the Human Resources Director of fast-food chain, In-N-Out, remarked:Efficiency wages are self-serving. Our store managers may make 100 to 120 percent over industry norms, but the money spent on salaries is seen as an investment. Our wages not only broaden the applicant pool from which we can choose employees, but increase performance levels and retention rates.... Although you can never know for sure why people stay with a company, I certainly believe it may influence why people like their job here. #p#分页标题#e# 

 Resources devoted to employees also contribute to health and pro-ductivity. Te International Labour Organization  (ILO) estimates  that “on the job accidents and illnesses annually take some two million lives and cost the global economy an estimated 1.25 trillion, or four percent of annual global GDP.”22  Overall, fewer accidents and sickness translate to more productive employees. Furthermore, studies have shown that corporate community service programs, common at many companies touting their social responsibil-ity, can help spur financially valuable innovation by “developing a variety of  competencies,  including  teamwork,  planning  and  implementation, communication,  project  management,  listening  skills,  and  customer focus.”23  

  And while NGOs and watchdog groups may  in  some cases be out to fight the “rise of the corporation,” in others, they collaborate with companies to provide new sources of information or strategies for management.  Risk avoidance is another area where NGOs can be useful to busi-nesses, and an additional reason why many company executives believe CSR can  improve financial performance.

 In Conversations with Disbe-lievers, Simon Zadek writes:Advocates advance two primary arguments for how CE [Corpo-rate Engagement] can help a company manage its risks. Te first claim#p#分页标题#e#  is  that engaging  in CE  can help avoid harms associated with socially irresponsible or illegal behavior perpetrated by em-ployees, and to mitigate the harms to the corporation created by accidents or mistakes.... Te second, more complex claim, is that engaging in increased CE will help companies better understand and manage risks that come from new and unfamiliar sources.24  GAP, Starbucks, Patagonia,  and Adidas  are  just  a  few  companies whose  partnerships with NGOs  help  them  acquire  knowledge  about production sites, working conditions, environmental damages, and other core components of their business.Early strategic  investments  in CSR can  improve product and ser-vice quality, defray future lawsuits, and prevent or at least mitigate the effects of negative media coverage. Sourcing guidelines and ethical codes help companies avoid the future costs of shoddy workmanship, unreli-able business  relationships, financial mismanagement, and disruptions of operations by improving the quality of products and services.

At Oc-cidental Petroleum,  community  involvement  and  their  environmental precautions have everything to do with risk avoidance.  Vice President of Communications and Public Affairs, Lawrence Meriage, explains: In  the  indigenous  communities where we  operate  in Ecuador, we have  a  long-standing  relationship with  #p#分页标题#e#the people. Having them look at us as friends, instead of enemies, means our opera-tions will not be disrupted and we will be able to negotiate new agreements later on. Building these relationships helps us avoid protests,  strikes,  or  other  disruptions  such  as  people  blocking roads.”25   After unveiling plans to build pipelines through  land belonging to the U’wa  community  in Colombia, Meriage  spent  time  responding  to over 40,000 protestors’ postcards and  letters. Te negative publicity  led to a “time sink” for the company and has forced them to take fiscal and moral obligations  into account when making company decisions about where to operate.    

      Now, before entering into new contracts, Occiden-tal  asks  a  series  of questions  about many  types  of  risks,  ranging  from geological  to political.  If  any  of  these  outweigh  the potential  rewards, Occidental may choose not to operate even if the deal appears profitable in the short run.Being the first company to act in an area of CSR can also create a competitive advantage by helping the company anticipate future legis-lation. Sidney Espinosa of Hewlett Packard#p#分页标题#e#  (HP)  explains, “It  is  im-portant  for  a  company  to  identify policy  issues  that  are hot  and  take a  stance/find  a  position  before  laws  are  passed.”27  

 In  an  interview  in 2003, Espinosa discussed how the company was already addressing the issues of product  take-backs  and  computer  recycling  through  its own private  recycling program and by pushing  for national  legislation  that the company could reasonably accommodate. New directives requiring manufacturers  to  take  back  and  recycle  electrical  products  show  that HP correctly predicted the trend, and the company will no doubt have an  easier  time  dealing with  the  new  #p#分页标题#e#rules  than will  its  less  forward-thinking competitors. PacifiCorp uses a similar strategy:  the company continues to increase its use of renewables while simultaneously pushing government policies that give incentives for using wind power and man-date renewable portfolio standards.

   By accurately anticipating future policy  trends  and  responding with  the  appropriate  social  or  environ-mental programs, companies believe they can become market leaders.Finally, many model  two  companies may  view CSR  as  a way  to increase  their  access  to  capital. As  early  as  1971,  the development  of (SRI) funds created a new market for capital. From “green funds” which focus on environmentally beneficial practices, to investors who push for living wages  at Responsible Wealth, SRI  funds use  a  variety of  strat-egies  to  select  companies  that  are  qualified  under  their  definition  of #p#分页标题#e#“socially responsible.” As would be expected, these targeted investments have convinced some companies to adopt CSR practices—Portfolio 21’s Teiwes recalls a  few cases where companies  initially rejected  from  the investment fund reapplied after adopting more environmentally friendly policies—and while most companies have not developed CSR programs or  reevaluated  their business  strategy  solely  to attract SRI capital,  it  is certainly another incentive for good works.

 As companies make strategic ventures into the social and environ-mental arena, little government involvement seems necessary to promote business considerations of more than just profit margins and investors’ pocketbooks. However, business involvement in social and environmen-tal affairs alone is not a recipe for success and does not guarantee that all stakeholder groups will be considered fairly. In model two cases, rather than promoting general CSR, public policy should focus on increasing transparency about  companies’ CSR practices by encouraging  compa-rable,  comprehensive  reporting  standards  or  disclosure  laws,  and  fos-tering  collaborations between businesses, governments,  and NGOs  to tackle specific issues. Tough debate continues over the effectiveness of mandatory CSR reporting (often called “triple bottom line reporting”) due  to  costs  #p#分页标题#e#and  the  risk  of  stifling  creativity  and  leading  to  “lowest common  denominator”  practices,     there  is  something  to  be  said  for greater  transparency about companies’ social and environmental  inter-ventions. Reporting can be an effective tool for companies to reevaluate their programs  in a number of areas, as well as a way  for outsiders  to monitor  their progress. Further, while groups  like BSR  in  the United States  foster  communication  and  collaboration  between  business  and NGOs, and while many companies have strategically aligned with non-profits or charities to work on particular issue areas, governments could play a greater role in the development of such partnerships by offering funding and education, and by showing an active interest in promoting the dialogue between organizations and sectors with different ways of thinking.  MODEL THREE: MULTIPLE FIRM GOALS, ALL CREATED EQUALTough model two companies predominate among SRI portfolios, Teiwes believes it is model three businesses that we should really strive to encourage. Model three explains the ideology of firms that have made commitments to environmental and social goals without evidence that corporate citizen-ship leads to tangible financial gains.

Te owners or managers have decided that  #p#分页标题#e#social and environmental achievements are  independently worthy of attainment and should be pursued with equal enthusiasm to profits. Wyse explains, “A  large part of CSR is the individuals involved in senior ranks. CEOs like to be involved in policy and service; it helps them to lead a ful-filling life. Just like others, executives feel good about giving back to their community and consider it part of their responsibility as a professional.”30  While uncommon in a society that measures success by GDP per cap-ita or by the amount of economic activity generated regardless of its source or deleterious effects, there are companies who view their business in terms of  its  social  and  environmental  contributions. Generally privately  run by social entrepreneurs, philanthropists or environmentalists, these companies often have CEOs or owners with deep personal convictions. Teir compa-nies make profits but financial goals do not trump social or environmental considerations.Tis ideology functions on the idea that businesses, like people, have moral  obligations  and  responsibilities  that  extend  beyond  the  financial world. Adidas’s Social and Environmental Affairs Manager, Gregg Nebel, scoffs at  the  idea of using CSR  is as a marketing  strategy. He explains, “Why market what you are doing  if you are simply doing what  is right? Te feeling here is that there is an expectation that a company will do the right thing, and there  is no reason to advertise that we are fulfilling this obligation.”Newman’s Own is one example of a company with a social purpose. Owner Paul Newman donates all of  the company’s profits and#p#分页标题#e#  royalties after taxes to educational and charitable causes, ensuring that the company will only increase profit margins to increase the firm’s ability to contribute to  social welfare. Lighting fixture manufacturer Rejuvenation and  forest products provider Collins Companies also exemplify businesses with deep-rooted commitments to the environment and their community. While each of  these companies  runs a business with  traditional financial goals,  they do not view their commitment to sustainable environmental practices as a strategy for business, but rather as an important end in and of itself.However, the degree to which such socially oriented firms can succeed is unclear. Although BSR reports that a “2001 Hill & Knowlton/Harris Interactive poll showed that 79 percent of Americans take corporate citi-zenship into account when deciding whether to buy a particular company’s product [and] 36 percent consider corporate citizenship an important fac-tor when making purchasing decisions,”        the evidence often is not there to support this, in either their buying patterns or shareholder votes. Tere are consumers willing to pay higher prices for peace of mind over the produc-tion methods of the goods they buy, but their limited numbers create niche markets for socially responsible brands rather than pushing the business community to evaluate the triple bottom line in all scenarios or markets. To encourage companies to follow model three, policymakers should reconsider current indexes for business success, accounting practices, and the  valuation of  intangible  assets.

  Model-three  thinking  requires more than teaching business owners and managers how to be responsible corpo-rate citizens; it requires transforming average citizens’ understanding about value creation and expanding definitions of success to include social and environmental triumphs. Tools  to place dollar values on  intangibles  like  these  #p#分页标题#e#social and en-vironmental  triumphs  are  already underway. By working within  the old framework, many  hope  to  quantify  the  financial  returns  on  intangible investments  and  to  translate  intangible  successes  into  tangible  results.   Some organizations, such as  the New Economics Foundation (NEF)  in London  offer  even more  radical  approaches  to measuring  firm  success. Challenging the traditional national accounts of material wealth—GDP or GNP—NEF created the Index of Sustainable Economic Welfare (ISEW) which measures well-being by factoring in “goods” which are not captured by GNP (e.g. household labor), and deducting “bads” such as long-term en-vironmental damage and the costs of crime.   Policies to promote socially responsible behavior  from a model-three perspective need  to encourage further research, education, and discussions of societal value creation. MERGING THE MODELS Tough  executives  often  structure  their  thinking  around  one  of  the three models, businesses have many  top executives, each with differ-ent feelings about the interaction between profits and CSR. To avoid giving off contradictory messages,#p#分页标题#e#  they present  themselves as a com-bination of the three models. Te fact that Patagonia’s founder, Yvon Chouinard is famous for saying, “Every time I’ve done the right thing for the environment, I’ve made a profit”34  makes Patagonia appear to be the perfect example of a model-two business. Yet Patagonia’s Social Audit Coordinator, Huntley Dornan, believes that Chouinard and his wife are so committed to their principles that they would probably be more likely to let the company go bankrupt than change the company’s core values, and maintains that in reality, the firm’s decisions reflect of a combination of models two and three.  

  Tough Qualcomm’s invest-ments  in  the  community  are  strategic, Vice  President Dan  Sullivan adds, “You make  investments  in your community because you  live  in it. Employees  live in the area, they go to the  library, they breathe the air. A good company knows it needs to do more than time and motion studies.”36 Even with  these blurred distinctions,  the  three models provide a useful framework for developing appropriate policies toward CSR. In all cases, government can play a proactive  role  in supporting policies promoting  an  awareness  and  emphasis  on  sustainable  development. Te European Commission has  taken  steps  to  learn more  about  #p#分页标题#e#the “knowledge economy and  the  importance of  intangibles as  competi-tiveness  factors,”  study  the  links between  intangible  investments and performance across companies and sectors, outline strategies for future financial  reporting  in Europe,  and hold  forums  to discuss  intangible assets as well as methods and practices of measuring and reporting.

 Efforts  like that of the European Commission further the discussion of CSR  without  assuming  that  all  companies  embrace CSR  in  the same way.  MOVING FORWARDWhile the field of CSR and public comprehension of its significance have expanded tremendously in the last decade, the broad range of motivations, programs, and policy suggestions suggest that there is no one solution that will encourage sustainable business practices among all U.S. companies. Tere will always be companies that see any government policy as more “red  tape”  and  to whom CSR will  #p#分页标题#e#just be window dressing.

And  there always will be companies that follow ethical standards and consider the social  consequences of  their  actions, not because  consumers demand  it or government  encourages  it, but because  someone  in  the business be-lieves it is the right thing to do. But there are also many middle-ground companies that are trying to decide not only how far their social and en-vironmental commitments should extend, but also how to conceptualize the interaction between their social, environmental, and financial perfor-mance. Given  the pressure placed on companies by various  stakeholder groups and the many groups trying to define socially responsible behavior, it  is no  surprise  the debate continues over  the existence of “true CSR.” Te  three models presented here  simplify  the discussion  in  a way  that makes it possible to identify the interactions among social, environmental, and financial goals across a variety of situations: a necessary first step in paving the way for a discussion about how to proceed. Plans to promote CSR—and thus sustainable economic development—must be tailored to fit  the  prevailing  business models  for CSR. Trying  to  encourage CSR without first understanding  the motivations  for corporate citizenship  is a lot like trying to design a building before you know what the ground is made of. Using the three models, we can come to a better understanding of the surface we have to build on.#p#分页标题#e#

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