What is the Responsibility of Business?: Reflections on World Inc., Addressing Questions from Government, Corporate & Social Leaders

Since the release of Bruce Piasecki’s new book, World Inc.: When It Comes to Solutions - Both Local and Global - Businesses Are Now More Powerful Than Government, and the launch of our Blog World Inc. "For Better or For Worse?", we’ve received many insightful questions from government, corporate and social leaders. We have decided to use our next few blog entries as an opportunity to address a few of the questions we feel are important to our pursuit to have more dialog and interaction on how business going global is colliding with business going green.

Question: Milton Friedman, in his classic 1970 New York Times Magazine article titled, “The Social Responsibility of Business Is to Increase It’s Profits”, wrote “The discussion of the social responsibilities of business are notable for their analytical looseness and lack of rigor. What does it mean to say that business has responsibilities? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but business as a whole cannot be said to have responsibilities, even in this vague sense. The first step towards clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.” – Response? [Government Executive]

Milton Friedman was right, particularly at that time in social, industrial and human history. The question may be is Milton Friedman right today? We believe he is, but that does not necessarily mean that corporations don’t have responsibilities. Friedman’s point that “the first step towards clarity [toward social responsibility] is to ask precisely what it implies for whom” is as relevant today as it was 37 years ago.

This inspires the thought, “are corporations truly transforming their business practices, policies and products toward a more socially responsible ground, or are they simply reacting in the short term, to price and competitive signals abound in the marketplace and as heightened by popular press and the convergence of science and knowledge that for the first time in human history, has been assembled in a global way?”

There are multiple signals that tell us that our natural resources are limited, that the carrying capacity of planet earth is being tested, that global pandemics and natural disasters will increase in intensity and volume in years to come and that we need to work within our socio-political-economic constructs to develop more sustainable ways to produce and consume goods as a global society. The World Forum on Sustainable Development, the Coalition of Environmentally Responsible Economies (CERES), the Millennium Ecosystem Assessment by the United Nations, the Intergovernmental Panel on Climate Change (IPCC), and the Kyoto Treaty are all examples of how science and technology have been tangling with policy and social need for more than 20 years. What these global initiatives point to however is a world that is on the verge of a social, cultural, political and economic transformation.

The result may be great cultural and systems change like what resulted from the Industrial Revolution, Scientific Discovery era or Renaissance period. We are just beginning this important transformation to a more sustainable society – thus as we grow, learn and mature as social capitalists we will inevitably stumble a bit, particularly as we define the role of government and business as they pertain to individual and social responsibility. The world is just beginning this transformation, so it’s a challenge to reflect in real time on what works and what doesn’t.

Businesses have responsibilities to their shareholders, private investors, customers and communities in which they do business in by way of their leadership. Milton Friedman stated that business lacked rigor and analytical strength when it came to social responsibility. However, in this 21st Century new forms of social enterprise have been born out of the need to identify, measure, and report social, environmental, governance and health related metrics. Firms and organizations like the Investor Responsibility Research Center, Innovest Strategic Value Advisors, Calvert, Domini Social Investments, SocialFunds.com, Dow Jones Sustainability Indexes, Standard & Poor's, among hundreds of mutual fund firms like Portfolio 21 and Walden Asset Management and other rating agencies have developed their own financial tools and processes for measuring corporation’s impact on society through environment, governance, and social metrics.

The money and market innovators noted above have added analytical rigor and strength to the notion of social responsibility, and have made what Friedman once cited as a “looseness” a multi-trillion dollar industry with teeth.

Mark C. Coleman
Senior Associate, AHC Group, Inc.
Mark@ahcgroup.com

HYBRID is to PRIUS as Toyota is to Social Response Capitalism

What is a social response capitalist?...A Social Response Product?...A Social Response Company?

Yesterday’s New York Times article, “Say ‘Hybrid’ and Many People Will Hear ‘Prius’” says it all. With sales topping 400,000 in the U.S. alone, Toyota has enjoyed great success with the Prius. Competing models like the Ford Focus, Honda Accord or Saturn Vue hybrids have not found as much success as Prius. And recently Honda decided to discontinue production of its Accord hybrid after two years of lackluster sales in the U.S. Last year Toyota Prius sales represented 40% of all hybrid vehicles sold in the U.S. The distinguishing factor for Toyota…is what we call social response product development and Social Response Capitalism.

Toyota built the Prius on an entirely new knowledge and technology platform. They did not try to fuse existing technology with a consumer need. Instead they gave the consumer something they were seeking all along – a new identity. In the sea of SUV’s, sport sedans, compact cars and trucks, Toyota found a consumer niche that was socially and environmentally motivated. They recognized, before their competitors, that a new kind of car needed to be born, and tailored its design over the past eight years to appeal to a new kind of consumer, the socially response consumer.

These social consumers might also be referred to as LOHAS Consumers or cultural creative’s, who represent “an estimated $208 billion U.S. marketplace for goods and services focused on health, the environment, social justice, personal development and sustainable living” (LOHAS). These consumers are beginning to influence new product innovation we term social response product development at the world’s largest corporations, like Toyota.

Toyota’s approach to social response product development is rewriting the textbook on innovation, product development and marketing. Toyota began the launch of Prius in 1999 with a loyal following of technology first adopters. After years of product refinement and consumer awareness Toyota has now moved the Prius toward a more mainstream consumer concerned about domestic and global energy and environmental issues like climate change or energy price volatility.

The July 4th New York Times article noted, “Unlike the original Prius buyers, who wanted to be first with its innovative technology, the latest owners are far more conscious of foreign oil dependence and global warming, said Doug Coleman, Toyota’s product manager for Prius…Consumer knowledge and consumer awareness is changing, Mr. Coleman said”.

Toyota’s grassroots approach to tweak the first generation and second generation Prius’ gave it a technology edge among competitors. Further, by focusing the Prius with a niche consumer initially Toyota was able to refine and redefine the vehicles performance and identity. Toyota proved with the Prius, that companies need to now compete on product price, quality, performance and social need. Toyota took eight years to get Prius to be the unique brand it is today where HYBRID is synonymous with PRIUS. Toyota found that it's not enough to simply offer a new or superior technology. The technology has to be multidimensional, it has to exceed the baseline technology on price and quality, and it has address true social needs in the marketplace. With Prius, Toyota created a new brand, a new social identity, like the way SUVs provided a certain identity for consumers in the mid-to-late 1990s.

In our view the future of global corporate competitiveness will be waged by the smartest, most savvy and strategic and most socially responsive firms. As social needs are defined in this new century by new requirements for clean air, water, transport, and energy – the most successful firms will be those, like Toyota, that answer public and social expectation through social response capitalism.

Mark C. Coleman
Senior Associate, AHC Group, Inc.
Mark@ahcgroup.com

Lincoln, the Consummate Chief Social Response Leader and Executive

On this, the eve of the 4th of July, it seems timely and appropriate to write briefly about a new kind of leader emerging strong, with grace and force in the world of business...The Social Response Leader

Today’s New York Times Business page has an article titled “Companies Giving a Green Office”. The article reports how many large corporations have now added “Chief Environmental Officer” and “Chief Sustainability Officer” to their starting team rosters including the CEO, COO, and CFO.

Chief Sustainability Officers are the new hammers inside corporate mansions, driving efficiency and looking toward new innovation to reduce operational costs while entering into new product markets. Driven by the regulatory and business risks and opportunities surrounding climate change, resource constraints and global competitiveness, modern sustainability officers are both subtle chameleons and fierce lions. They are change agents working against a hundred years of industrialization and know-how, discovering new ways to do business while delivering profits and enhancing shareholder value.

Traditionally thought of as a cost center focused on reducing compliance, environmental and health and safety risks and corporate exposure, this new century’s corporate environmental officers are multidimensional strategists that navigate internal and external business opportunities and politics as they work to deliver on the bottom line. In doing so these modern day hero’s not only ensure a company is operating within compliance, they create new product, service and market opportunities for greener products and clean production. In the late 1970s and early 1980s corporate environmental efforts were about containment and treatments of legacy wastes and compliance with the law. In the late 1980s and early 1990s corporations became more attune to reducing risks and preventing pollution. In the mid-to-late 1990s corporations adopted environmental management systems, developed eco-efficiency tools and began to look at the life-cycle impacts of their operations, products and materials use. Since 2000 the modern corporation has continued all of its historic environmental, health and safety responsibilities, but has now also evolved to include more corporate social responsibility, sustainability and ethical guidelines in its mission, vision and operations.

No longer a discrete function in the modern corporation, today’s environmental officer now has its own trade and executive leadership training groups including AHC Group Corporate Affiliate Program, GEMI, Business Roundtable, and Business for Social Responsibility. In addition there are numerous executive briefing publications like The Corporate Responsibility Officer Magazine and Corporate Strategy Today.

President Lincoln is often referenced for his strong leadership. His experiences and actions throughout his distinguished life continue to teach us how to be better leaders. In World Inc., author Bruce Piasecki examines what makes an effective leader in this new era of social responsibility and corporate environmental strategy. In the chapter titled, “Developing Leaders We Can Trust” Piasecki notes, “It is my view that with the right kinds of social leaders, large multinational corporations can play the key role in solving the long list of challenges facing society in the 21st century.” Piasecki goes on to draw out leadership lessons from Donald T. Phillips book “Lincoln on Leadership: Executive Strategies for Tough Times”. Phillips summarized many of Lincoln’s leadership strategies including building strong alliances, serving with honesty and integrity, persuading rather than coercing, being a master of paradox, and encouraging innovation. In his storytelling way, in “World Inc.”, Piasecki presents how he sees these Lincoln traits in the most impressive and effective executives he’s worked with over the past 30 years, including Chief Sustainability and Environmental Officers of major corporations.

We welcome our readers to watch firms like Wal-Mart, Nike, IBM, Green Mountain Coffee Roasters, DuPont, Dow, GM, FirstEnergy, Shell, Whirlpool, Honeywell and other global giants in our Network that have elected to have Chief’s of environment, sustainability, energy and social responsibility. These leaders are influencing tomorrow’s products and markets as they seek to deliver value to their firms’ bottom line, and society’s bottom line. We welcome you to learn more about these leaders through our executive workshops. To learn more contact Mark@ahcgroup.com.

Mark C. Coleman
Senior Associate, AHC Group, Inc.
Mark@ahcgroup.com

Reflections on World Inc.: Questions from Government, Corporate & Social Leaders

Since the release of Bruce Piasecki’s new book, World Inc.: When It Comes to Solutions - Both Local and Global - Businesses Are Now More Powerful Than Government, and the launch of our Blog World Inc. "For Better or For Worse?", we’ve received many insightful questions from government, corporate and social leaders. We have decided to use our next few blog entries as an opportunity to address a few of the questions we feel are important to our pursuit to have more dialog and interaction on how business going global is colliding with business going green.

Question: “The Wall Street Journal recently reported that several prominent environmental groups gave a “lukewarm” response to Citigroup’s announcement that it will spend $50 billion over the next 10 years on a wide range of climate change issues. How can corporations communicate effectively that they are “doing enough” for the environment?”

[Environmental Executive from Multinational Firm]

The Citigroup $50 billion announcement is very significant. It aligns with a trend we are seeing cut through the finance and investment community – which is greater scrutiny and value placed on how money is managed, invested, compounded and expended. Bank of America made a $20 billion commitment this past March. Like Citigroup, Bank of America is seeking to invest and finance in green building products, alternative and renewable energy technologies, and projects that minimize greenhouse gas, particularly carbon, emissions. Before these announcements, Goldman Sachs developed an Environmental Policy Framework as part of its guidelines for investing in clean energy via its 2005 pledge of $1 billion. There is a cascading waterfall effect happening among the worlds finance giants. At first a little capital investment flowed into tech start-ups and environmental related projects.

As the past 2 years have played out, the size of the investment and breadth of the investment has increased, as the flow of new environmental finance dollars has created a waterfall of change in the finance industry. There are some social and environmental groups that look at these finance industry trends with watchful eyes. They believe, in short, that these industries have been highly profitable and have collected billions from customers over the years in unnecessary fees to begin with. And, the lending practices of the industry, in general, have not aligned with environmental conservation or preservation in the past. So they feel that these large dollar commitments are a form of green-washing that society at large may not benefit from. We believe that the influx of capital into clean energy and environmental goals is a welcomed investment, and one that overshadows some government programs. The Citigroup, Bank of America and Goldman Sachs investments alone total more than $70 billion, many times larger the budget for the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy. Even so, it’s the cascading effect of money and investments, the return on investment that these firms are seeking, that will drive greater future social and environmental investments that what’s been reported in the past 3 years.

The water is just beginning to rush toward the waterfall. Corporations have difficult time reporting that they are “doing enough” for the environment. The accelerated “fear factor” of climate change being played out in the popular press has the public more informed, but also more charged than ever before. Regardless of how much climate change may impact major environmental systems like fisheries, water cycle, agriculture production and forest resources – there is an increasing general public sentiment that every firm has a responsibility for action, not just the big utility, energy, or transport firms that emit a large percentage of greenhouse gases. Corporations need to align themselves with environmental goals that match their future competitiveness. This will include their products, operations, processes, competitors, markets and customers. If the “flat world” has taught us one thing, it’s that what is important to just one customer can rapidly become important to millions of customers through the click of the send button or snap of the digital camera.

Mark C. Coleman
Senior Associate, AHC Group, Inc.
Mark@ahcgroup.com

Reflections on "World Inc.": Addressing Questions from Government, Corporate & Social Leaders

Since the release of Bruce Piasecki’s new book, World Inc.: When It Comes to Solutions - Both Local and Global - Businesses Are Now More Powerful Than Government, and the launch of our Blog World Inc. "For Better or For Worse?", we’ve received many insightful questions from government, corporate and social leaders. We have decided to use our next few blog entries as an opportunity to address a few of the questions we feel are important to our pursuit to have more dialog and interaction on how business going global is colliding with business going green.

Question: "Being from Washington D.C., and given the subtitle of the book, it is appropriate to ask whether you think government is part of the problem or partner in the transitions you identify?"
[Executive from an Environmental Non-Profit in D.C.]

The subtitle of World Inc. “When It Comes to Solutions — Both Local and Global — Businesses Are Now More Powerful Than Government”, is meant to be provocative and engage intelligent questions like yours. We believe the social-political-economic transformation that is upon us, and that has signaled a new form of capitalism we call social response capitalism, is like a tidal wave. The wave is being fed by the curiosity of consumers, the rules and regulations of government, the graciousness of philanthropists and foundations, the careful eye of non-governmental organizations and the competitive spirit of corporations. The subtitle for World Inc. suggests its just one element shaping this wave, when in fact the wave is being shaped by all of these forces working together.

The wave is now being mounted by a few choice social philanthropists, social capitalists and mega-corporations that have all been watching and waiting for the opportune time to get on and ride. As the wave builds in the next 5-to-10 years it will sweep along with it, many other firms that will announce, like Citigroup and Bank of America, their intentions to go global and go green. We don’t believe the wave will dissipate. Instead it will build with force as it finds a way to gracefully wash us all ashore in a few decades, on a more sustainable and carefully position beach front.

We’ve found that calling government part of the problem is unproductive. However, challenging government leaders to recognize the transition that’s upon is appropriate and necessary. It is the challenges of all those that feed the wave to monitor one another’s roles, responsibilities and actions. The gale force winds of government may be appropriate to push back the onslaught of corporate greed for green. In this sense we mean green both literally and figuratively. For example, as Western countries transition from a century of industrialization it will need to educate those countries just entering an era of industrialization. Policy has a role in shaping this new world just as much as better products do. And the thread weaving policy, products and people together is leaders – ones that we can trust – ones that see through the clutter and listen for opportunity and for what’s essential right for all of the forces upon the wave.

The power of government to influence social transformation is reenergized and will emerge (in our view) with more gusto in the energy and environmental space more rapidly across the next 60 months.

Mark C. Coleman
Senior Associate, AHC Group, Inc.
Mark@ahcgroup.com

China Needs a Carbon Conscious Diet…U.S. Should be the Global Leader to Show All Nations the Way!

Global CO2 emissions are on the rise, and China, not the U.S., is now leading the way. That’s the finding from a new study commissioned by the Netherlands Environmental Assessment Agency (MNP) released June 19th. Our appetite for less expensive products is catching up with us, as least as far as global CO2 emissions go. As China grows, they are doing so in a quick, low-cost way. The net result: business as usual old school manufacturing, natural resource depletion and poor environmental quality.

The MNP provided some further CO2 analysis from a per capita basis and found that the U.S. produces nearly four times as much CO2 as China, or about 20 tons per person. MNP also noted that China’s CO2 and other greenhouse gas emissions are primarily a result of the production of goods which are exported to industrialized countries. Global CO2 risk is a tricky thing, particularly for U.S. businesses, policy makers and consumers. On one hand, we continue to reap the rewards of inexpensive consumer products, relatively inexpensive oil and gas (compared to Europe or other industrialized nations), and on the other we may just be deferring the true cost of climate change, resource depletion and human health impacts to future generations. When these true costs will hit us, we don’t really know. However, we know that the culture and tactics by current administration leaders like Vice President Dick Cheney have had there day, and are fading quickly like big dinosaurs that once also ruled. These leaders will yield and transition to a new generation of social entrepreneurs, philanthropists and policy makers who seek a better world. This change is not being brought on by what’s en vogue, its being brought on by a shift in values, ethics and concern for the future.

You’d think that the U.S., after 100+ years of industrialization, may have a thing or two to teach China about growing in a smart, more sustainable way. But the fact is – we don’t, not because we won’t or that we don’t know how. We are just very slow, like the big dinosaur, to adapt and change. The battle over who emits more CO2 is nothing to be proud of. CO2 emissions are considered a measure of economic productivity. Think about it, the more CO2 being emitted, the greater economic productivity. This is not a metric worth touting however. To transform our current state of global competitiveness, innovation and economic growth to one that is more enlighten and more conscious we need to begin utilizing our knowledge to help other countries develop their markets with the best available clean technology and processes.

As CO2 and other greenhouse gases become more heavily regulated, they may constrain economic growth in the short term. However, there are economic solutions. We know that ramping up the manufacture of clean and renewable energy production technologies, embracing energy efficiency and conservation, deploying clean manufacturing technologies, and rethinking the design, use and disposal of consumer products to be more sustainable is all possible. We see the transformation to more social response product solutions cascading throughout all product sectors: energy, transportation, building products, food and beverage, clothing and retail services. The change is upon us – and companies are strategizing how to minimize their carbon footprint en route to a more competitive market position.

According to the Netherlands Environmental Assessment Agency, China’s CO2 emissions now top the U.S. by 8%. In 2005 China’s emissions for CO2 were 2% lower than the U.S. Forgetting the number game for a moment, the future of global competitiveness, diplomacy and democracy is not going to be fought over the availability or price of oil. That war has been waged, arrogantly and wastefully for decades. The war of the future will be over clean air, clean water, and access to new markets based upon what we call Social Response Capitalism. It won’t be a war in our notion of fighting; rather it will be a race to achieve zero net emissions – and new pride driven by social needs for healthcare, education, sustainable communities and sustainable business enterprise. We’re forging ahead on this new economy, and hope you will join us!

Mark C. Coleman
Senior Associate, AHC Group, Inc.
Mark@ahcgroup.com

Make Some Noise for a Leader in Social Response Real Estate Redevelopment…The Noisette Company

Have you ever heard of a company named Noisette? Me either until yesterday when my friend and colleague Bruce Piasecki, founder of AHC Group, Inc. and author of “World Inc.: When It Comes to Solutions - Both Local and Global - Businesses Are Now More Powerful Than Government” mentioned how he met John Knott, President and CEO of Noisette Company in Vancouver BC while on a speaking tour for his book.

And, after doing some research on Noisette Company, I’d like to report out on this impressive firm. I encourage all to read more about Noisette, as they are an excellent case example on how community redevelopment and sustainability are transforming the future of our real estate and living environments. The company has the right balance of leadership, talent, creativity and experience. Please review the Case Western Reserve Weatherhead School of Management interview with CEO John Knott and case example of Noisette Company.

Noisette is working to develop a 3,000 acre sustainable community, what they call a “city-within-a-city” in North Charleston, South Carolina. CEO John Knott believes that sustainable communities need to “be equally responsive to social needs, environmental responsibility and economic vitality”, each a major theme captured by Bruce Piasecki in World Inc. The principles and values of Noisette’s vision for a sustainable community include: healthy indoor environments, ecologic health, social equity and just, culturally creative, beautification of human built environment, physical and economic accessibility for all, resource efficiency, diversity, and evolutionary potential.

Noisette Company is comprised of a unique team of redevelopment experts. They have, in their community planning for North Charleston, developed the “Noisette Urban Alliance” a group of manufacturers that are partners in the Noisette redevelopment effort. Each manufacturer is a manufacturer of high quality green building materials, furnishing and appliances – each dedicated to clean manufacturing and adhering to sustainability principles throughout their product development and operations. The Noisette Urban Alliance of companies has teamed to create one of the nation’s most ambitious sustainable redevelopment projects. Noisette Urban Alliance partners include: Kohler, Carrier, Andersen, Whirlpool, Hearth & Home, Hubbell Lighting, Sherwin Williams, Owens Corning, Herman Miller, James Hardie, Universal Forest, Therma Tru, Interface, Hanson and USG.

We’ve had direct experience with many of these Noisette Urban Alliance partners though our global network of Corporate Affiliate Leaders that work with us at AHC Group. We are proud to say that these firms are social response leaders, each developing new products and services that meet economic, environmental and social parameters – and do so through robust product certification and testing. In addition these firms have developed internal metrics and standards for operating sustainable enterprises.

We commend John Knott, President and CEO and Noisette Company for their leadership and drive to truly work on some of the most pressing challenges of our time. Together, the Noisette redevelopment team and its alliance partners will make a powerful impact on the community of North Charleston. We wish them well and encourage our readers to learn more about them at: http://www.noisettesc.com/discover.html.

Mark C. Coleman
Senior Associate, AHC Group, Inc.
Mark@ahcgroup.com