Business & Society How can a business contribute to a sustainable transformation of society Mostafa Bjram Business and Society Introduction Creating a business in today's climate will come with many different areas to think about, one of the main points that you hear today is how the business can help contribute to a sustainable society. The environment as well as the societies wellbeing will become an important question for the business to tackle, even if the society that the business is based in does not value sustainability this question will still be important for not only the world outside of the country but maybe the stake/shareholders of the business. Globalisation has helped businesses create their product in almost any part of the world so the question of what can be seen as viable sustainability is not something out of the ordinary. Sustainability has to be thought of in almost every action that the business takes, from investing to the after work actions that the employees do. There can be a betterment incentive in all of them not only for their image but for the legitimacy of the company's moral values. Economical incentives are also a part of a business sustainability view. Why would a business be interested in building a more sustainable society, and how would they take action to ensure that they are able to contribute to this sustainable society? In this paper I will try to argue for how a business is going to be able to contribute to a sustainable transformation of society. This will be done using theories and critically viewing practical ways of how a business can achieve better sustainability for the society that it is based in as well as the world. Theories A theory that is going to help businesses to contribute to society is the democratisation of corporate governance. While different ways of corporate governance have been done throughout the years, the most relevant change has to be democratic corporate governance. Many organisations now have their base in many different countries thanks to globalisation, this also means that corporations and societal issues such as corruption and global warming are not only of concern for the state (Matten & Crane, 2005). Corporations have taken advantage of this and as a consequence businesses provide basic rights and goods, they act sort of like a state (Matten & Crane, 2005). There is also a chance for corporations to make more profit through these gaps of governance, these gaps in governance open the organisation up to more risks as they are reliant on rules set by the state. Also when organisations are based in a less democratic environment they can through lobbying or other ways of shaping decision making for the government, give an advantage to the firm (Scherer et al. 2012). What the democratisation of corporate governance entails is to give stakeholders in the organisation a chance to have their voices heard (Scherer et al. 2012). Through democratic governance the corporation can gain the consent from all stakeholders and get ahead of the change of location for risks, resolve conflicts as well as help the interest of the public (Schneider & Scherer. 2015) .The inclusion of stakeholders gives a rise to two problems, the first being decisions of which stakeholder to include while making decisions and secondly that to keep the legitimacy of the corporation, inconsistencies from reallocating risks has to be dealt with in a fair way since you can not consider all of the stakeholders involved (Schneider & Scherer 2015). Although these problems could be dealt with through democratic processes and opening their structures to civil society, this way you can achieve communication based legitimacy (Schendier & Scherer. 2015). Through democratic corporate governance corporations could establish laws for the incorporation of stakeholders in the governmental structure, this will help address the gaps and problems caused by globalisation that cannot be directly addressed by the country. Porter & Kramer (2011) wrote about shared value between companies and society. What the shared value theory is, is the operating practices as well as the policies that can advance economic and societal conditions but also enhance competitiveness between companies (Porter & Kramer. 2011). Both the economic and societal progress has to be focused on with value principles, what value entails is the benefit that one gets either company or society relative to the cost (Porter & Kramer. 2011). Societal issues are treated from a value perspective and not as a peripheral thing, since not seeing it from that value perspective has caused the connection between economic and social concerns to be obscured (Porter & Kramer. 2011). How companies can create shared value is by creating social value, this in turn makes economic value. Through three distinct methods you can create social value (Porter & Kramer. 2011). The first method is reconceiving products and markets. The biggest societal needs can come down to health, housing, being financially secure and doing less damage to the environment. All of these needs are mostly unmet and companies have not been able to meet the demand due to them having become disconnected with if the product is actually good for their consumers or the customers customer (Porter & Kramer. 2011) The second method is “redefining productivity in the value chain” (Porter & Kramer. 2011 p.8-9), many issues in society can affect and be affected by a companies value chain. Issues such as water use, working conditions and the health and safety of workers and individuals in society (Porter & Kramer. 2011). Many externalities that the firm may not have thought about affected them as much can actually save the firm and society alot of profit and environmental damage, an example that Porter & Kramer (2011) gives is Wal-Mart that cut 100 million miles from their delivery route and in turn lowered their CO2 emissions as well as saving 200 million dollars in costs. The third method is “building a supportive industry cluster at the companies location” (Porter & Kramer. 2011 p.7), clusters are geographic concentrations of firms which greatly improves innovation and productivity, examples of clusters can be Kista science city or Silicon Valley. Cluster does not only include businesses but different institutions such as academic programs or trade associations, enabling the creation of clusters to develop will help lead the company to better the local economy and help with profit in the end (Porter & Kramer. 2011). How can businesses contribute to a sustainable society? Corporations focusing more on helping the stakeholders voice their ideas and opinions will in the end help the corporation reevaluate the actions that they have taken in society (Schneider & Scherer. 2015). Through the democratisation of a corporation the firm will be able to change the way that they operate in less democratic countries. If the wellbeing of the stakeholders is threatened by the countries laws and regulations or lack there of, then having relevant stakeholders get a say in how the corporation operates will certainly give an advantage in making sure they are treated humanely (Schenider & Scherer. 2015). The soft laws and regulations that a corporation creates with the help of inputs from stakeholders can consequently influence the society that they are based in, making it so that the state's rules and regulations regarding corporations and working conditions imitate that of the corporation that has a democracy. This is also relevant regarding the laws for sustainability, environmental laws that can be lenient in countries that have less democracy, the organisation can in turn provide sufficient ways of combating the lack of sustainability and environmental laws in the society to help better the overall sustainability that the society can achieve (Schendier & Scherer. 2015). Environmental sustainability is not the only thing that can change if the corporation opens its structures to society. When a corporation bases one of their operations such as manufacturing they will more than likely use a country whose laws are not as critical of the treatment of workers, this is where democratisation of corporate governance can help alleviate the workers from being treated unfairly (Scherer et al. 2012). Relevant stakeholders will be able to combat the shareholder dominant governance through the democratisation, helping the workers who have been given lesser rights because of the country they are in (Schenider & Scherer. 2015). While changes in the corporation will be made through democratic vote, the organisation can also influence the local state to change their laws and regulation accordingly just as they can with the environmental laws (Schenider & Scherer. 2015). Through these methods of opening up the corporation's structures to society they can help transform society to a more sustainable one. A corporation can help disrupt the norm of value maximisation by focusing on shared value between companies and society, through multiple methods a corporation is going to be able to advance societal and economic conditions of the country (Porter & Kramer. 2011). Societal issues such as global warming can be combatted by companies in the form of less CO2 emissions, by making sure that the CO2 emissions are kept at a minimum there can be profit to be made for the company (Porter & Kramer. 2011). The example given above regarding Wal-Mart shows just that, by getting rid or shortening certain trade routes you can in turn be forced to create a better, more efficient way of transporting goods and or importing them. Wal-Mart saved 200 million dollars in revenue and was able to cut CO2 emission by a large amount, which shows how societal value and a company’s value can be shared and create profit for both society and the company. Creating this shared value can be through a company’s reevaluation of their products and the market (Porter & Kramer. 2011), what needs are not met? What demands in society can the company supply them with, these demands are not just products but societal needs as mentioned with the Wal-Mart case. Being able to create societal value will create economical value and this can positively affect countries that are not flourishing economically as some other countries, as well as cut down on emissions and help create a more sustainable society (Porter & Kramer. 2011). Redefining the value chain for a company can be a great help in highlighting issues such as the water usage or the working conditions of the employees, the external issues in society can affect corporations such as the environmental issue (Porter & Kramer. 2011). Corporations will be able to help evolve sustainability by focusing on the value of society more, the example of Wal-Mart comes in again regarding this subject (Porter & Kramer. 2011). WalMart did not anticipate that by helping reduce CO2 emissions they would ultimately help themselves in saving profit (Porter & Kramer. 2011). By making corporations reevaluate their value chain they are going to be able to increase profit as well as impacting society positively and also helping them achieve a more sustainable society. Opening up a corporation's structures while focusing on the well being of the workers can impact societies with laws and regulations which are not in accordance with humane working environments (Schneider & Scherer. 2015) (Kramer. 2011). The society will be able to emulate the same regulations and soft laws that the corporation has in place to help employees. Helping a society become sustainable can be achieved by creating clusters, by making organisations work together innovation will see a positive rise as well as the local economy (Porter & Kramer. 2011). Academic programs as well as different corporations can be created when focusing on creating these clusters, through these programs society is going to be able to increase the overall quality of work that can be done and also help negate the need for importation of workforces. When corporations open their structures up for the others to emulate or improve upon development in the country both economical or ecological due to the fact that when working on sustainability it is better for the corporations to work together than by themselves (Porter & Kramer. 2011). Clusters will improve a society’s sustainability through corporations, they will be able to open their structures up and help society with emulating laws and regulation, given the corporation has been democratised (Scherer et al. 2012). If the corporation has been democratised then other corporations around them can do the same and in the end they may benefit economically and help reduce the carbon footprint that the companies have created. Conclusion To conclude the findings we can see that there is alot of different ways that a business can help transform a society to be more sustainable. The shared value principle helps businesses to reevaluate their product and the markets to better understand what it is the consumer wants, this also means that they have to change the way the corporations does some things such as what use of transportation or what material is used to better create value in society and for the corporation. They can also create local clusters to help innovate products and services as well as create academic programs for the benefit of society. These clusters of corporations will create work and help process information through all corporations. Corporations can increase their legitimization in countries with lesser democracy by democratising themselves and give the stakeholder more say in decisions made for the company. Relevant stakeholders in the company as well as stakeholders outside of the company can get a say in decisions to better help the company when operating in places where laws and regulations are not for the benefit of the company or society. Through all of these ways a business can in fact help a society be more sustainable as well as give benefit to themselves and to the workers. By changing the hierarchy in the corporation and by opening the structure up for society to benefit from the slow laws and regulations created, it will create societal value and corporate value. References Kramer, M. R., & Porter, M. (2011). Creating shared value (Vol. 17). Boston, MA, USA: FSG. Scherer, A.G., Baumann-Pauly, D., & Schneider, A. 2012. Democratizing corporate governance: Compensating for the democratic deficit of corporate political activity and corporate citizenship. Business and Society, 52: 473–514. Schneider, A., & Scherer, A. G. 2015. Corporate governance in a risk society. Journal of Business Ethics, 126(2), 309-323.
