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PHIL HARDWICK — What is the social responsibility role of business?

PHIL HARDWICK

Last week I was in a restaurant in Fayetteville, Arkansas and noticed something. It was the third restaurant in three different cities in three days that made a contribution to some type of charity. I’m seeing this more and more, not only in restaurants, but other businesses as well. What do they know that Milton Friedman did not know?

You remember Milton Friedman, the author of the classic book, “Free to Choose” (with Rose Freidman). He was also the American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his on consumption analysis, monetary history and theory and the complexity of stabilization policy. Here’s what he said about the role of business and social responsibility:

“There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

Contrast that idea with what is known as conscious capitalism, which Whole Foods’ John Mackey and his research partner Raj Sisodia, refer to as businesses serving the interests of all major stakeholders—customers, employees, investors, communities, suppliers, and the environment. They came out with a book, “Conscious Capitalism – Liberating The Heroic Spirit of Business,” that still remains on the business bestseller list. Many businesses have taken that idea to heart. They support causes and contribute to organizations that do social good. These include everything from arts organizations to feeding hungry children.

Speaking of hungry children, the restaurant referred to above is Tacos4Life. It is based in Conway, Arkansas, and has five locations in Arkansas with more on the way. It donates 22 cents for each taco, quesadilla, salad or rice bowl sold to Feed My Starving Children, an organization that feeds hungry children. Tacos 4 Life goes beyond financial contributions. It has sessions for volunteers to hand-pack meals specifically formulated for malnourished children, which are then shipped to distribution partners around the world. According to its website, https://tacos4life.com, “Tacos 4 Life exists to help end childhood starvation around the world through our Meal 4 Meal program.” I wonder what Milton Friedman would think of that.

Could it be that companies that engage in social responsibility activities are actually using their resources to increase profits? Perhaps customers choose to do business with such companies over companies that do not do so.

The research on this subject is mixed. A 2004 study of 52 other studies, “Corporate Social and Financial Performance: A Meta-Analysis,” compiled by researchers Marc Orlitzky, Frank L. Schmidt and Sara L. Rynes, concluded corporate social responsibility does benefit businesses. More recent studies tend to support this idea.

So what should your company do? As usual, the answer is that it depends. For some businesses it makes a lot of sense. Not so for others. Companies that promote ethical behaviors need to understand the needs and wants of their customers, their employees and their owners. They also need to consider how to make contributions. Should they be only financial or should they involve employees? More and more businesses are involving their employees in social responsibility activities. Examples are constructing a Habitat house, putting together teams to run in charity marathons, volunteering in local schools, etc. The list goes on and on.

There are caveats. In today’s politically and socially divided world it can be a mistake to support causes that are controversial. It also does not make much sense to support causes that aren’t related to your line of business. For example, it might make a lot of sense for a gun manufacturer to support youth hunter safety education programs or a beer distributor to endorse safe drinking and driving initiatives. On the other hand, it might not be so beneficial for a plumbing supply company to support disease research.

In summary, corporate social responsibility appears to be on the upswing. If your business is not involved in supporting a community activity or sponsoring an ethical social cause now may be the time to consider doing so.

 

» PHIL HARDWICK is a regular Mississippi Business Journal columnist. His email is phil@philhardwick.com.

 

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