The dynamic between corporations and their social/environmental responsibilities has always been in flux as is highlighted through the different political ecology discourses. This chapter serves to explore these changes as society becomes more aware of its impact on the planet by tracing the idea of CSR as far back as Cicero. This section draws on literature from both economists and environmentalists to demonstrate how and why this development has taken place.
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The notion that companies are responsible for more than just making money for shareholders is not new. Records show that Cicero wrote about moral principles and “controlled greed” as early as the first century BC (Frynas, 2009). The Quakers, as far back as 1640, considered the health and welfare of their workers and communities vitally important for the success of their enterprises (Doane, 2005). The boycott of food made with slave labour helped to eventually put an end to the slave trade. Cadbury’s, from their conception, had leaders who had a genuine interest in the wellbeing of their employees (Frynas, 2009). However, Adam Smith believed that the corporation was the best tool for the development of society, not out of any altruistic tendencies but out of pure selfishness. In The Wealth of Nations, Smith explains the concept of the “invisible hand” stating:
“By pursuing his own interest (the individual) frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.” (Smith A. , 1776)
Our need to survive leads us to provide services to others but only out of self-preservation, companies need not play any part in the public sphere. Though Smith’s teachings are important, he did not address externalities because in the 1770s, they were not so much of an issue. Nonetheless, when Milton Friedman wrote in the New York Times in 1970, the issue was shunted to the side (Friedman, 1970). In “The Social Responsibility of Business is to Increase Profits” Friedman backed up Smith’s claim about the role of business. He maintained that business need only perform any tasks intrinsic to its core activities and managers are only responsible to shareholders.
Externalities make an appearance in Friedman’s work but only to point out that responsibility for taking care of them rests with government. For him, authorities – national, local or otherwise – should instigate Pigovian taxes[1]. The taxes would be calculated by putting a price on the externality or pollution created. One can understand why Smith neglected the issue of externalities when he wrote the firm was little more than the size of a household. Yet when Friedman wrote his article, Silent Spring by Rachel Carson had already been published (1962) and the environmental movement had made their first steps into the public arena. The Limits to Growth, written ten years later in 1972, modelled the effect of a growing global population and finite resources and was based on the work of Thomas Malthus written in 1798. Garrett Harding had also published a well-known article The Tragedy of the Commons in 1968. Though not necessarily pieces of work grounded in economics, they were nevertheless relevant to Friedman’s articles in as much as they reflected the effect of economic activities.
This trust in the power of capitalism to provide for all also informed people’s relationship with their environment. For the majority, the dominant discourse identified the earth as a limitless supply of resources to be used for the development of man. It was taken for granted that the cornucopia provided by nature would exist to serve man while man’s ingenuity ensured that obstacles would be overcome. The remarkable progress that has taken place since the industrial revolution confirmed these beliefs. This Promethean discourse still pervades today, articulated in the speeches of government ministers and CEOs – technological progress will spur economic growth. Confidence in this discourse is high with some economists boldly predicting that there is no limit to how much growth can be achieved. (Dryzek, 2005)
Today’s dominant economic modus operandi is that of neo-liberalism: Profit at all cost. The state has left markets to allocate resources gradually deregulating financial industries since the 1980s, but with profit being the main aim, social and environmental factors are left by the wayside (Falk & Heblich, 2007). A recent article in the Telegraph newspaper titled: “I’m starting to think that the Lefts might actually be right” reflects on this period of deregulation (Moore, 2011). He also writes on the failure of banks to operate correctly and suggests that “we are bust – both actually and morally” (Moore, 2011). The curiosity lies here: why, even though people still believe in neo-liberal economics, never ending growth and keeping externalities external, are there an increasing number of companies within fashion placing more emphasis on their environmental and social strategies?
Since the fall of the Berlin Wall, the concept of civil society has blossomed (Körner, 2004). The one viable alternative to capitalism has fallen and the vacuum quickly taken up by civil society. One could argue that the lack of friction between capitalism and communism actually opened up a space for social activism within a capitalist framework. Left leaning policies gained new life as CSR activities, harder taint by the communism brush – especially apt in the United States. It’s almost as if a light has been switched on: capitalism is the best we’ve got so we better make it work. As a result, stakeholders are expecting more from companies in assisting with many of the today’s most pressing problems from HIV/Aids to Climate Change. A fact confirmed by a 2007 survey in which CEOs stated that expectations regarding the behaviour of companies were higher than ever and would continue to rise (Frynas, 2009). This development is partly due to the shrinking size of governments around the globe, the increasing interconnectedness of the world and by the mere fact the of the world’s largest economies, over half of them are transnational companies (Werbach, 2009) (Matten & Crane, 2005). These companies represent a vast amount of capital but as Carol Sanford suggests, capital itself is not the main issue. The actual polemic here is the narrow definition of capital which counts as important only that which is financial and accounting only for the effects on one’s own returns (Sanford, 2011).
There is a similar situation in the fashion sector as companies work on very short lead times to cut costs while maintaining dynamism but they are gradually exposed to the whims of changing weather patterns and a maturing workforce. Recent fires in Russia, together with floods in Pakistan and in Australia caused major disruptions to the supply of cotton which led to record cotton prices. These have increased by 30 – 40% since 2010 with high street brands being forced to pass the costs on to their customers, raising prices by at least 8%. Uncertainty regarding raw materials reigns deep as companies are no longer able to receive quotes 3 months in advance and prices are only confirmed when orders are made. High levels of uncertainty drive away potential investors.
In addition, the recent financial crisis has made people weary of companies, who must now do all they can to regain trust – not just of customers but also investors. The increasingly short term approach to markets before the crash has left an indelible scar as such there is a growing belief amongst investment professionals that environmental, social and corporate governance issues will have an increasing effect on the performance of investment portfolios. (UNPRI, 2005) Hurricane Katrina wreaked havoc for a variety of businesses (energy, real estate and insurance) too focussed on short term thinking and as a result lost billions of dollars. (Werbach, 2009) From an investment perspective, one can see why companies are taking more of an interest in CSR activities. The actions taken by these parties go, in my opinion, go much further than what is needed to satisfy investors. Some of the interventions taking place within the fashion industry are genuinely innovative and show a desire to make sustainable and ethical developments that go beyond compliance.
As mentioned earlier, the Promethean discourse is still dominant. Small changes are taking place however and slowly influencing the way that some of the Prometheans are adjusting their point of view. For these characters, the quest for income is crucial, yet when that income is based on the world’s natural resources stability and growth are questioned. The economic value created by these companies comes at a price. In using up natural resources and adding new elements (waste) to the ecosystem we alter the way that ecosystems function. (Boons, 2010) These pressures are creating a new environment for businesses and indicate that a new approach is needed to tackle problems. There is a growing realisation that corporations can no longer operate in isolation and away from the societies they serve, add to that the increasing willingness of companies to collaborate with stakeholders and lately even with rivals to effect change (Ethical Trade Initiative[2], Sustainable Apparel Coalition2[3]) (Mallin, 2010). This is a view also shared by Carol Sanford also maintains that for businesses, responsibility is a function and benefit of being alive. (Sanford, 2011)
In the foreword of Sanford’s book The Responsible Business, Chad Holliday (former CEO of Dupont) states that “we are pushing the limits of our natural resources” while Rebecca Henderson (Professor of Environmental Management at Harvard Business School) highlights the constantly high rates of unemployment, together with increasing inequality and other social problems that are impacting on communities. (Sanford, 2011) Sanford’s approach to CSR is to ensure that policies are put into place and become part of the DNA of the company. It’s more than just introducing new products as you will see later on from the example of Nike.
Sanford refers to the origins of the word corporation calling it a living system with the ability to adapt, be resilient, and crucially to evolve. Communities have every reasonable expectation that a corporation, “in return for its existence lives up to the laws, ethics and expectations of reciprocal participation and will function in all ways as a contributing member of society” (Sanford, 2011). Stressing the importance of collaboration, Sanford highlights 5 key stakeholders for companies – customers, co-creators, earth, investors and community – which are all areas where operational CSR strategies can make an impact. One could argue that Kate Fletcher’s ideas about the “pluralistic view of sustainability ideas, issues and opportunities in the fashion and textile sector” and about the integration of “human well-being and natural integrity” allude to the same ideals (Fletcher, 2009). Fletcher’s focus on systemic thinking “about resource consumption, energy use, and pollution potential and social impact of textile fibres” provides a base for the evolution of the industry (Fletcher, 2009).