Recently, I read a provocative article in the Ethical Corp magazine that critised the ‘preoccupation’ with the business case for corporate responsibility.
My first reaction, before I had finished reading, was of immediate disagreement. While I had the luxury of being in the academic world before working at CSCC, I myself thought that we should not have to make the business case for complying with human rights and environmental standards. After all, not only is it morally the right thing to do, but the business case itself relies a lot on first mover advantages and brand differentiation. If all companies were ‘good’ corporate citizens, they would not be able to charge an ethical premium on their products and their stocks would not be listed in preferred indices based on their CR performance. Not to mention that in some situations, there is a strong business case (at least in the short term) against taking a socially or environmentally responsible course of action.
However, out in the ‘real world’, working on solutions-based approaches to sustainable compliance with basic labour standards at the factory level, the necessity of the business case came sharply into focus for me. For example, in many cases we are dealing with factories who are not paying minimum wage, enforcing overtime, and failing to provide personal protective equipment (by no means a definitive list of common violations). As we were developing training and consultation materials to build capacity in factories with recurring non-compliance issues, it became clear that, in order to motivate factory managers running their businesses on slim profit margins and tight deadlines, unless we could articulate the financial benefits of compliance (beyond just the threat of a client withdrawing their work – a difficult and costly decision in any case), it would be impossible to get management buy-in and ownership of CR.
The ‘client threat’ of potentially withdrawing orders is not a sustainable incentive since 1) it depends on the continual auditing of 100% of the supply chain and 2) there is no consensus on whether closing a factory down resulting in workers losing their jobs would actually be more detrimental to a community than keeping it open (see Nicholas Kristoff’s op-eds in the NY Times for more - although controversial, in my opinion - comments on the latter position).
Therefore, our intent is to make the business case for compliance at the factory level. One example is where we present data on the rate of accidents by hour of shift work (the number of workplace accidents and injuries shoots up in the 10th – 12th hours of work). While this may appear obvious to some, to others it may help to make the case for shorter work hours. The problem is, much of the data is western-focused. We really need region-specific data from factories on the implications of long work hours (more accidents, higher rate of quality defects?), low pay (higher turnover rate?), and shoddy health and safety practices (higher insurance premiums?). In addition, for the factories to truly see the results for themselves, they would need to track their accident rates by hour of shift work over time. In some cases, factories don’t even record workplace injuries because of the insurance liabilities.
Anyway, while I ended up agreeing with many of the points made in the Ethical Corp article, in my work at least, I cannot afford to abandon the business case just yet.
‘So What is the Business Case for Corporate Social Responsibility?’, Mallen Baker, Ethical Corp Magazine, 15th August 2006