Social responsibility is a catchall phrase for doing right things — doing things that make for a better world. In her essay in the NYT Economix section this weekend, “The Profits of Virtue” Nancy Folbre, an economics professor at the University of Massachusetts, Amherst, wonders if for profit businesses can really be socially responsible.
Among the important questions addressed by recent economic research are whether socially responsible commitments lower profitability and, if not, how corporations distribute the costs among their stakeholders.
Folbre explains that the evidence that businesses that commit themselves to being socially responsible can prosper in competitive markets is equivocal. People don’t agree as to what is or is not socially responsible. Who actually ends up paying the added costs of socially responsible actions? What are the politics of games in which doing right things on one hand are traded off against doing wrong things on the other hand?
There is a cold logic to the business of business for profit called the bottom line. In a competitive marketplace an enterprise will only survive if it can deliver the goods and still realize a profit. A negative return won’t do. Breaking even won’t do. No matter how you look at it, the cost of doing right things is always passed along to the consumer. We the consumers must always pay the profiteer for doing right things.
In other words, the burden of added cost necessary to guarantee the profitability of the “socially responsible” business for profit is always passed along to society at large. At best it’s like a voluntary tax paid by those who are willing to pay, and can afford to pay, the added cost of acting “responsibly”, by whatever measure is fashionable in the marketplace on any given day.
The fond hope that companies can “do well by doing good” sometimes extends to the assertion that they can even increase profitability. Skeptical economists tend to counter with “there’s no such thing as a free lunch.”
Even the idea that a high-minded business for profit might simply reduce its rate of profit taking runs into the bottom line wall, if only because in a competitive marketplace, the other guy who takes greater profit by whatever means, will prevail. In practice, the bottom line is the lowest common denominator by which business survival, “red tooth and claw” is ultimately decided.
Doing right things always entails doing them when they are most inconvenient and even unprofitable. Social responsibility and business profitability are fundamentally incompatible. Doing right things requires a collective commitment on the part of a nation, to pay the short term costs necessary in order to realize the long term overall profits of a better world. This collective commitment must include in part, a willingness to tell those who compete for profit by whatever means, when “enough is enough”.