Beginning about 30 years ago, many large companies (and some smaller ones) had developed compliance teams and environmental management strategies — and had become quite proficient in tracking the requirements of laws such as the Clean Air Act and the Clean Water Act. Beginning about 20 years ago, some companies began to see an opportunity to go “beyond compliance” and to use environmental strategies as a way to differentiate themselves in the marketplace.
In the past decade, a large number of businesses have come to recognize that energy and environmental initiatives help to spur innovation, create value, and build competitive advantage. Not that every
company is a positive force for a sustainable society, but many now seek to deliver solutions not only in response to their own pollution and natural resource management challenges, but to those of their customers as well.
Last August, the Business Roundtable published a statement that reframed the principles of “the role of a corporation” which included a stronger commitment to serve all members of the community and to protect the environment. What factors have driven this shift in corporate responsibility?
We have seen in the last few years, a strong shift away from what might have been called “shareholder primacy” and the idea (often attributed to University of Chicago economist Milton Friedman) that the purpose of a corporation should be centered on profit maximization and the best possible returns to shareholders. The Business Roundtable made it clear that in the 21st
century, companies should take a broader view — and while continuing to produce attractive returns for their shareholders also be attentive to the needs of other “stakeholders” including customers, employees, suppliers, and the communities in which they operate. I have argued in a similar vein in the recently released volume, “A Better Planet
,” that we are approaching an “end of externalities” in the business world.
This shift in core values will mean that any company with a business model that depends on imposing harms on society — whether that is pollution up a smokestack, under-paying for natural resources like water, or under-providing for their workers — must expect to be called upon in the next few years to stop their harm-causing behavior or to pay fully for these harms.
How widespread do you think these principles are in actual practice today?
I think that the stakeholder vision of corporate purpose is rapidly gaining traction. In January, for example, Larry Fink, the CEO of BlackRock, the world’s largest investment manager, declared in a letter to the CEOs of the companies in which BlackRock holds shares that they needed to take action to address critical sustainability issues, such as climate change, and to shift their focus from short-term profitability to “long-term value.”