Chapter 1: A Social Role for Business
Backgrounding and Concepts
Snapshot
Australian business is experiencing a transition in expectations of its social role. The social obligations of business have traditionally been met through producing goods and services responsibly, acknowledging community standards and expectations, with optimum returns on shareholder funds. Many companies now believe they should go beyond this and take a greater role in meeting social needs. Even so, itis difficult to pin down an agreed definition to guide companies’ social performance. Some aspects are clear and specified in corporate law and social regulation. Yet, there are new pressures on business which introduce different expectations.
Some companies take a broad view of their social responsibilities and include the expectations of all the groups that make up the internal and external environment of a company – employees, customers, suppliers, shareholdersas well as external communities. Others see the issue more as one of extending financial support for community welfare, sport, the arts or disadvantaged groups such as the unemployed or the homeless.
The origin of these new pressures is complex. Business is concerned for its reputation, which has suffered over the past two decades in Australia and internationally. It is aware that it needs community support and trust. Also driving heightened community demands of business is a broader cultural change that is as pervasive in our lives as the economic transformation we are experiencing. The role of government is in transition throughout developed economies, including in Australia and people are seeking more involvement in their communities. Companies are reconsidering how they relate to the attitudes and expectations of employees as they build high performance workplaces. The global knowledge economy is transforming the nature, flow and use of information in the new social environment for business.
A range of concepts and models has been developed over the past decades, particularly in the United States, to describe the social role of business and its involvement in the community? The key concepts that are used to describe business activity in this area are terms such as corporate social responsibility, enlightened self-interest, stakeholder relations, and the firm as a citizen. However, no one set of concepts or definitions prevails in practice in Australian business.
There have been a number of studies, some led by business, that explore the benefits for business of community involvement, although they have been mostly in North America and the United Kingdom. The Australian context differs in a number of respects and the business community has embarked on its own study of one aspect of its social role – corporate community involvement.
Introduction
The social responsibilities of companies are, and will continue to be, of key concern for Australian business. The topic is regularly in the media, popular inpolitical commentary and discussed in the community at large. Many business leaders and company employees echo the call for a greater social role for business, and many companies have converted these sentiments into company policy.
The translation of social responsibilities into business practice is multifaceted.Companies have focussed their attention on various issues ranging from business ethics and corporate governance, product and service quality, environmental performance and sustainable development to responsibility for supporting the arts, community events and social welfare. To complicate matters, these issues arise at a time when the globalisation of markets is challenging companies’ efficiency and productivity.
Even though the question of accepting wider social responsibilities has become a prominent issue for business, it is not easy to pin down a common understanding of what this means in the Australian environment. Some responsibilities of an Australian company are straightforward. Corporate law specifies fiduciary responsi-bilities and accountability to shareholders. A large body of law regulates aspects of acompany’s economic and social performance and determines the boundaries foremployment practices, production standards, environmental standards, servicestandards and so on. New pressures on business, however, introduce different expectations. Somecompanies take a broad view of their social responsibilities and include all thegroups that make up the internal and external environment of a company – employ-ees, customers, suppliers, shareholders as well as external communities. Others seethe issue more as one of extending financial support for community welfare, sport,the arts or disadvantaged groups such as the unemployed or the homeless.The origin of these new pressures is complex. Business is concerned for its repu-tation, which has suffered over the past two decades in Australia and internationally.It is aware that it needs community support and trust. Instances of poor corporatejudgement and failure to meet community standards have clearly sharpened thecommunity’s attitude to business and tolerance is eroding on a number of fronts. Important as it is, this explanation only partly delineates the new context forbusiness. Also driving heightened community demands of business is a broader cul-tural change that is as pervasive in our lives as the economic transformation we areexperiencing. The attitudes and expectations of community, governments, employeesand their families all comprise elements of the new social environment for business. The community’s case for business involvement is perhaps readily explained.The task of this study is to understand ‘the business case’for community involvementby business. What does business anticipate as outcomes or benefits? How is successor failure evaluated? What are emerging trends for the future? Discussion is not lim-ited to conventional financial indicators such as return on investment. Valuingintangible assets such as reputation, employee loyalty and community support isincreasingly part of a broadly defined assessment of commercial returns and businesssustainability. The benefits from community involvement are best seen in this light. To set a general context two key questions must be explored. First, what condi-tions are driving present concerns for the social role of business? Secondly, what def-initions, concepts and models have developed over the past few decades to describe the social role of business and its involvement in the community? The literatureabout the social role of business is mostly from the United States, with some fromthe United Kingdom and Europe and very little from Australia. Clearly this weakensdiscussions of the Australian cultural context; but there are, however, enough gener-al features of business and corporate life to make the literature useful.