A Company’s Social Responsibility to Act Responsibly

Wouldn’t a world in which businesses completely neglected the environment, ignored safety regulations and bulldozed any obstacle in their way just to make money be a sad and scary one to live in?  Well, according to American economist, statistician, academic and author Milton Friedman, this is exactly how the business world is and how it should remain.  In his article entitled “The Friedman doctrine – The Social Responsibility of Business is to Increase Its Profits,” Friedman states that any attempt of businessmen to promote desirable social ends, convince others that “business has a ‘social conscience’” and that it “takes seriously its responsibilities for providing employment, eliminating discrimination avoiding pollution,” etc., are nothing but examples of these businessmen “preaching pure and unadulterated socialism” (Friedman 1).Friedman claims that only individual people can have responsibilities, whereas “business” cannot (2).  He differentiates a corporation – an “artificial person” that can have artificial responsibilities – and “business” that, as a whole, cannot.  I disagree with Friedman’s ideas on the subject; he is merely basing his argument on the “word choice” game.  While the word “business” refers to the activity being done by the corporations, business would not be possible without the individuals that work at these numerous corporations.  So, while Friedman argues that any social responsibility that is fulfilled is merely the social responsibility of an interested individual, I rebut that the ideas and actions of the individuals are what make up the company and its values.  And while he states that “to say a corporate executive has a ‘social responsibility’ in his capacity as businessman must mean he is acting against his responsibility to work in the interest of his employees to makes the most money as possible,” I argue that corporate executives can simultaneously make as much money as possible while adhering to their values and the values of the company.  Based on my thinking, while businesses do in fact have the responsibility to make as much money as possible for its employees and stockholders, this “as much money as possible” should be made without the company causing harm to the environment, employees or customers (Friedman 2).  Despite what Friedman claims, “business” does and should have social responsibility to promote the betterment of not just employees’ bank accounts, but also the world.

In the presence of such disheartening essays, it is always comforting and refreshing to hear about companies like Petrobras, the multinational energy company headquartered in Rio de Janeiro, Brazil.  Petrobras does not have a great history of being an environmentally friendly company, to say the least.  In January 2000, a leak in a corroded pine-line spilled 350,000 gallons of crude oil into Guanabara Bay near Rio de Janeiro, and just six months later there was an even bigger leak at a refinery near Curitiba where a million gallons of oil poured into two rivers.  In both cases, outdated leak detection technology aggravated the situation.  In March 2001, insult was added to injury when two explosions occurred on one of Petrobras’ P-36 oil platforms, eleven employees were killed and the platform sank (Gabrielli de Azevedo 2).  While these occurrences are shocking to us, Friedman would argue that Petrobras has no social responsibility to the environment or the animals that live in the now-contaminated waters.  As long as Petrobras is making the most money that it can, then all is well with the world despite the huge amounts of pollution (Friedman 2).

Fortunately, Petrobras does not share Friedman’s skewed views either.  Nowadays, one would not even know that Petrobras was the same company as ten years ago.  Petrrobras recognized the fact that it was negatively impacting the environment; the company had its own idea of what its social responsibility should be and decided not only to fix its mistakes, but also to prevent them from occurring again in the future.  Petrobras is now acknowledged as a global leader in sustainability practices, is a member of the World Business Council for Sustainable Development and the United National Global Compact, is listed on the Dow Jones Sustainability Index, its social and environmental report received the Global Reporting Initiative’s highest rating for transparency, and the research and rating firm “Management and Excellence” ranked it number one among the world’s oil and gas companies for sustainability.  Petrobras now executes health, safety and environment programs, and it is clear from the case that the entire company, from the CEO down to the lowest level workers, have a huge dedication to making sure Petrobras maintains its newfound environmental excellence (Gabrielli de Azevedo 3).  Friedman does not suggest breaking the law with regard to safety and health regulations, but he also does not suggest any sort of responsibility to improve standards past what the law requires if it is going to make the company lose any money in any way at all.  Friedman would have scoffed at the actions of Petrobras.  While it was definitely necessary for the company to make some changes due to the massive fines it was getting because of the oil spills, Friedman would have seen any improvement beyond this point as excessive and a waste of money.  However, in the long run, if Petrobras did not change its ways in the drastic manner that it did, the environment in the Rio de Janiero area would have been completely ruined, as well as the safety of the animals and people living there.  Isn’t it, then, the company’s responsibility to do whatever it can to prevent this from happening?  Or should the company, as Friedman appears to suggest, ignore anything not directly related to the money that the company makes?  What if every company followed Friedman’s suggestions and had no regard for the environment?  Wouldn’t we be living in an entirely polluted and destroyed world?  It is safe to assume that if a company, such as Petrobras, is acting responsibly with regard to the environment, that it is most likely acting responsibly – and even ethically – in all other parts of its business as well.  Those are the kinds of businesses that we want in America.

Petrobras is just the beginning of the argument against Friedman’s claims that the only social responsibility that businesses have is to make as much money as possible for shareholders.  There are an innumerable amount of companies in addition to Petrobras that practice social responsibility towards the environment, its employees and its customers and do not disregard these entities as they try to make as much money as possible.  Even while practicing social responsibility to these external entities, these companies are entirely successful and able to make a massive profit.  The best example of one of these successful and socially responsible companies is Apple Inc, an “American multinational corporation that designs and markets consumer electronics, computer software, and personal computers” (Apple 1).  For example, Apple has been able to make significant profits while simultaneously acting socially responsibly towards the environment.  On Apple’s corporate website, there is a section with information about Apple’s actions in this regard.  First, Apple operates in a way that allows them to minimize their carbon footprint; the company calculates its carbon footprint accurately by using a “comprehensive life cycle analysis to determine where [their] greenhouse gas emissions come from” (Story 1).  Apple is also working to minimize the impact of their ongoing growth.  Apple knows that the most important thing that it can do as a company in order to reduce their impact on the environment is to improve their products’ environmental performance.  For example, Apple works to “design [products] with less material, ship with smaller packaging, be free of toxic substances used by others, and be as energy efficient and recyclable as possible” (Story 1).  Since 2008, Apple’s revenue has grown 74% and their greenhouse gas emissions grew only 57%.  In addition to using less material and eliminating toxic substances, Apple’s actions include using responsible manufacturing for their products and also “ensuring the highest standards of social responsibility wherever our products are made. We insist that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes” (Supplier 1).  Apple has covered every base to in order to make sure it is acting responsibly in every aspect of its business.  Interestingly, despite what Friedman claims, Apple is still currently one of the most profitable companies.

It addition to acting socially responsible toward the environment, Apple also acts extremely responsibly towards its customers; the company appreciates and rewards loyalty.  In fact, “[CEO Steve] Jobs’ passion – even reverence – for satisfying customers trumped conventional business objectives like making money and ‘serving the shareholder’” (Samuelson 1).  According to Judith Samuelson in her article “Steve Jobs Made Sure Apple’s Main Mission was Satisfied Customers, not Profit,” Jobs had the right idea – companies should focus on quality and excellence in delivering good and services, because this will ultimately create value for customers and investors alike.  Interestingly, Samuelson cites, Milton Friedman and his social responsibility article, stating that Friedman “offered illustrations of when a company would want to invest in the local community, for strategic reasons” (Samuelson 1).  Ironically, it seems that even Friedman may agree with Jobs’ loyalty to the customers who are loyal to him and his company; in acting responsibly and respectfully towards customers, companies will be able to maintain loyalty and maximize their profits in the future.  A great example of Job’s loyalty to his customers occurred two months after the iPhone went on sale.  Jobs made the decision to drop the price from $599 to $399 in order to be more successful in the marketplace.  While those who did not buy the iPhone right away were pleased at the $200 drop in price, the loyal Apple customers who bought the product immediately upon its release were furious that they were charged $200 more than other less loyal customers.  In order to apologize and make amends with these customers, Steve Jobs offered a $100 refund to all of them.  Even though Apple clearly lost money from the refund awarded to all of the initial iPhone purchasers, in the end, Jobs knew that Apple had a social responsibility to its customers (Jobs 1).

In conclusion, there are numerous companies that focus more on their social responsibility to outside factors  — such as the environment and its customers — than they do on making a profit.  Though Friedman argues that a company’s only social responsibility is to make a profit for its shareholders, the aforementioned companies prove that acting social responsibly and making a lot of money are not mutually exclusive.  In fact:

The best executives are wise enough to realize that zealous pursuit of profits is not             a viable long-term strategy. The founders of Google and Facebook, as well as the             leaders of Unilever, PepsiCo, Xerox and Procter and Gamble and a host of other             public companies, plus private firms, like Levi Strauss and SC Johnson, are clear             about the complex, long-term orientation and mission of their enterprises. Even             Jack Welch has weighed in, calling a fixation on shareholder value “the Dumbest             Idea in the World (Samuelson 2).

What Friedman needs to realize is that while it is very important for companies to act in the best interest of their shareholders by trying to make and much money as possible, more times than not when a company acts socially responsibly, it is actually setting up for the future success of the company.  It is clearly seen from Apple’s success and simultaneous responsible behavior towards the environment and its customers that it is possible for a company to do both, and more importantly, that it is much more beneficial to the company in the long run if it acts responsibly in the present.

Works Cited

“Apple Inc.” Wikipedia, the Free Encyclopedia. Web. 04 Nov. 2011.                                                      <http://en.wikipedia.org/wiki/Apple_Inc.&gt;.

Friedman, Milton. The Social Responsibility Of Business Is to Increase Its Profits. The                 New York Times (1857-Current file), Sep 13, 1970. ProQuest Historical                                 Newspapers, pg. SM17. 1 Nov. 2011.

Jobs, Steve. “To All iPhone Customers.” Apple. Web. 04 Nov. 2011.                                                    <http://www.apple.com/hotnews/openiphonel

Gabrielli de Azevedo, Jose Sergio. The Greening of Petrobras. [S.I.]: Harvard Business             School, 2009. Web. 1 Nov. 2011.

Samuelson, Judith. “Steve Jobs Made Sure Apple’s Main Mission Was Satisfied                               Customers, Not Profits.” The Huffington Post. 2011. Web. 11 Oct. 2011.                                   <http://www.huffingtonpost.com/judith-samuelson/steve-jobs-made-sure-                         appl_b_1005361.html>.

“Supplier Responsibility.” Apple. Web. 04 Nov. 2011.                                                                            <http://www.apple.com/supplierresponsibility/&gt;.

“The Story Behind Apple’s Environmental Footprint.” Apple Inc. Web. 01 Nov. 2011.             <http://www.apple.com/environment/&gt;.

My course of action with this paper:

The first step that I took in writing this paper was to choose an ethical thinker / one of his articles.  While this may seem backwards, I wanted to choose a thinker whose ideas intrigued me; I chose Friedman’s article on social responsibility of companies because there were several cases that could be related to his idea, and because I completely disagreed with him and though I could make a solid case against him.

Next, I needed to choose one or more cases that pertained to the Friedman article.  I originally wanted to select one that was a good example of a company taking positive social responsibility, and one that was a good example of a company that initially ignored their social responsibility but has since made amends.  Petrobras was the obvious best choice for a positive example of social responsibility with regard to their current environmental practices, and Nike the obvious negative example because of the labor abuse in their factories abroad.

However, during my research to find how Nike has improved its labor practices, I found an article about how Apple Inc’s CEO, Steve Jobs, was more interested in catering to customers than he was about turning a profit.  I decided that this would be an interesting topic to look into, and ultimately found that Apple, a hugely successful company, acts socially responsibly with regard to both its customers and the environment.  I therefore decided to write about apple’s success and simultaneous responsibility (and that it is possible to do both) rather than Nike’s lack of social responsibility.

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2 Responses to A Company’s Social Responsibility to Act Responsibly

  1. Jordi says:

    I’m glad you remembered the instructions and included your process.

  2. Jordi says:

    You’ve uncovered a logical flaw in Friedman’s reasoning: it is hard to know what actions today that seem like they loose money (the refund) may actually be net positive over longer time horizons. Maximize shareholder value may be a motivation or a goal; it can’t be a strategy as it does not guide a firm as to what to do.

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