What Makes a Business Virtuous: Draft 1

By Kelsey Sampson

Although it is highly important for businesses to have corporate social responsibility programs, it is inadequate if the core business does not cover their more basic responsibilities. 

Cotopaxi's "Do Good" mission is at the heart of their CSR

Corporate social responsibility (CSR) is any business action that addresses widespread social, community, environmental, or other issues by utilizing company resources (usually in the form of profits). Especially in the 21st century, the emergence of CSR programs in more businesses has led individuals to question what the role of business should be in approaching social issues. There has also been a push businesses to address more basic responsibilities, such as diversity in the workplace or minimizing their carbon footprint.

First, a case for corporate social responsibility:

Although I will argue that only having a CSR program is inadequate, first it should be understood that CSR programs are something that should be happening within businesses. This is for three main reasons:

      1. There is an undeniable need.

Inequality shown through 2 housing developments

When I was 10 or 11, I went to Mexico for the first time. One afternoon, my dad--a highly determined mango-lover--took my family from the heavily tourist-populated area of Mexico where we were staying to an area several miles away. What I saw there dazed me. The houses were small and falling apart, the streets were lined with garbage, but what shocked me the most was how desperate the people seemed to get us to buy the trinkets they offered us. As a Utah born-and-raised kid, I had no idea that such inequality could exist. This experience, along with several others throughout my life, has helped me see the need for those with power--such as profitable businesses--to help alleviate problems such as poverty.

Jean-Jacques Rousseau, a French Enlightenment thinker, pondered the nature of inequality much like that found in Mexico in his Discourse on Inequality. In considering the origin of inequality, Rousseau imagines a state of nature before society where men have limited needs and minimal contact with other humans. However, men progress from this state as they are forced to learn skills and have more frequent contact with other humans. Humans soon abandon their simple and pleasant ways as they specialize, creating a society where individuals must compete and win to be happy. This inequality discussed by Rousseau creates a deep need for individuals to be helped to improve their own living conditions.
   
      2. Many individuals have the resources to help.

This idea of specialization and competition discussed by Rousseau is at the heart of capitalism. Capitalism was first introduced by Adam Smith in The Wealth of Nations. In this book, Smith argues that “man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only... It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love.”

Ironically, the system that touts that individuals only have to look after their own interest is what gives so many individuals the means to be more invested in the social welfare of others. Capitalism has created a lot of profitability for a lot of businesses, giving businesses the opportunity to take on that role as social welfare catalysts. As Capitalism: A Very Short History points out, “capitalist societies will certainly have to deal with growing problems in the future, but their diversity and capacity to change will provide opportunities to reform,” and this source of this change can be businesses stepping up to the plate and altruistically helping others.

      3. It is often profitable for companies to do so. 

Milton Friedman, a highly recognized economist, argued that give-back programs go beyond the scope of what businesses should be. He stated that “there is one and only one social responsibility of business to use its resources… [and that is] to increase its profits… without deception or fraud.” Anything beyond that, Friedman argues, is the wrong way to do a good thing.

What Friedman fails to acknowledge, however, is that despite the fact that CSR programs usually involve giving large amounts of money away, these programs often actually increase shareholder wealth. This is largely because companies’ CSR programs are crucial in increasing the ethos of the company. Give-back programs increase the evident character of a company in making the company more compassionate, trustworthy, and ethical. For example, Cotopaxi proudly gives 1% of all its profits to its foundation, which in turn uses those profits to alleviate poverty in especially vulnerable places of the world. As a Cotopaxi customer, I feel more inclined to chose them over similar companies because they come off as incredibly concerned for others and like the type of company that does what they say they will do. Thus, although Cotopaxi is giving up millions of dollars to this foundation, they are likely better off because of the increased business that comes from individuals that are attracted to the company’s character.

With all that said, just having a CSR program is not enough. 

Vivint employees volunteer through a CSR program

It is not uncommon for companies to have a less-than-virtuous core business, but then “make up” for their practices by ingenuinely throwing money at a social cause. However, this is an insufficient response to poor businesses practices. This past year I have worked with individuals at BYU who are creating classes, books, conferences, and a business supporting this idea of making business more virtuous. We have conducted a lot of research to support the notion that CSR programs are not enough; businesses need to be good by simply existing. This positive existence should include a product mix should have positive effects on the world, humanized interactions, non-permanent environmental practices, honest financial interactions, and so on.

This idea of demanding better basic businesses practices is not one that is new to the 21st century. During the Industrial Era, workers’ unions began to emerge. Capitalism and industrialized markets were largely raising the standard of living for individuals. However, as business became more of a machine to pump out as many goods as possible, individuals in the workplace faced unfair conditions. Many individuals worked long hours, received unfair wages, and did not have a lot of safety on the job. Thus, workers’ unions were formed. These unions demanded that their employers respect the rights, and that businesses improve their basic behavior. Similarly, today, individuals are demanding more from their places of work. It is not enough for their company to simply donate to kids in Africa; companies must first consider the more basic actions that will make businesses have a positive effect on the world.

Image credits:

• Designbloom: unequal scenes: drone photography documents stark social inequality across the world. Author: Nina Azzarello. 
• Questival: Cotopaxi.com, permission requested.
• Careers at Vivint: Vivint.com, permission requested.

Source credits:

• Rousseau, Jean-Jacques, 1754. "Discourse of Inequality." Arlington Baptist University.org.
  https://www.aub.edu.lb/fas/cvsp/Documents/DiscourseonInequality.pdf879500092.pdf
• Smith, Adam, 1776. "Wealth of Nations." Accessed through print. 
• Friedman, Milton,  2009. "Corporate Social Responsibility."
  https://lucidmanager.org/milton-friedman-corporate-social-responsibility/
• Fulcher, James, 2004. "Capitalism: A Very Short Introduction." Accessed through print.