Future roles of business in society: the expanding boundaries of corporate responsibility and a compelling case for partnership

The roles and responsibilities of business in society, in particular global business, are being defined more broadly by an expanding range of stakeholders. This paper aims to review these changes and their implications in order to understand better the likely future expectations of business in society and the way in which leading companies are setting new standards of responsible business practice. It begins by tracing trends within corporate social responsibility debates, and then draws on empirical research and observed stakeholder demands of business, to argue that the boundaries of corporate responsibility are advancing both internally and externally.Internally, these boundaries are changing in terms of the increased responsibility of corporations towards their direct and indirect internal stakeholders. This is shown through innovations in business practice to achieve enhanced social justice in the workplace, improved governance, and more accurate disclosure of non-financial risk. This paper provides a context for this discussion by examining emerging international law, guidelines and voluntary initiatives, regulatory frameworks, and risk review procedures that increasingly seek to redefine corporate responsibility by establishing new norms of best practice and behaviour. These boundaries are also expanding externally, as society increasingly expects global business to work with others to provide solutions to humanitarian crises and endemic problems facing the world. This paper explores how some companies are doing this by applying core competencies in ways that integrate social development and business goals. It suggests, in turn, that the challenges of these expanding boundaries of responsibilities are best addressed through strategic partnerships.This paper concludes that there are new multi-stakeholder convened global governance frameworks evolving that are encouraging businesses of the future to re-invent themselves as a ‘force for positive good’ in society. This involves going beyond the paradigm of simply ‘doing no harm’, and way beyond previous expectations of business as being only about shareholder value. This prediction is supported by examples drawn from the practice of global companies that are already innovating to fulfil this wider role.     

What makes an effective executive

An effective executive does not need to be a leader in the typical sense of the word. Peter Drucker, the author of more than two dozen HBR articles, says some of the best business and nonprofit CEOs he has worked with over his 65-year consulting career were not stereotypical leaders. They ranged from extroverted to nearly reclusive, from easygoing to controlling, from generous to parsimonious. What made them all effective is that they followed the same eight practices: They asked, "What needs to be done?" They also asked, "What is right for the enterprise?" They developed action plans. They took responsibility for decisions. They took responsibility for communicating. They were focused on opportunities rather than problems. They ran productive meetings. And they thought and said "we" rather than "I." The first two practices provided them with the knowledge they needed. The next four helped them convert this knowledge into effective action, for knowledge is useless to executives until it has been translated into deeds. The last two ensured that the whole organization felt responsible and accountable. Effective executives know that they have authority only because they have the trust of the organization. This means they must think of the needs and opportunities of the organization before they think of their own needs and opportunities. The author also suggests a ninth practice that's so important, he elevates it to the level of a rule: Listen first, speak last. The demand for effective executives is much too great to be satisfied by those few people who are simply born to lead. Effectiveness is a discipline. And, like every discipline, it can be learned and must be earned.     

The myth of secure computing

Few senior executives pay a whole lot of attention to computer security. They either hand off responsibility to their technical people or bring in consultants. But given the stakes involved, an arm's-length approach is extremely unwise. According to industry estimates, security breaches affect 90% of all businesses every year and cost some $17 billion. Fortunately, the authors say, senior executives don't need to learn about the more arcane aspects of their company's IT systems in order to take a hands-on approach. Instead, they should focus on the familiar task of managing risk. Their role should be to assess the business value of their information assets, determine the likelihood that those assets will be compromised, and then tailor a set of risk abatement processes to their company's particular vulnerabilities. This approach, which views computer security as an operational rather than a technical challenge, is akin to a classic quality assurance program in that it attempts to avoid problems rather than fix them and involves all employees, not just IT staffers. The goal is not to make computer systems completely secure--that's impossible--but to reduce the business risk to an acceptable level. This article looks at the types of threats a company is apt to face. It also examines the processes a general manager should spearhead to lessen the likelihood of a successful attack. The authors recommend eight processes in all, ranging from deciding how much protection each digital asset deserves to insisting on secure software to rehearsing a response to a security breach. The important thing to realize, they emphasize, is that decisions about digital security are not much different from other cost-benefit decisions. The tools general managers bring to bear on other areas of the business are good models for what they need to do in this technical space.     

Introducing T-shaped managers. Knowledge management's next generation

Most companies do a poor job of capitalizing on the wealth of expertise scattered across their organizations. That's because they tend to rely on centralized knowledge-management systems and technologies. But such systems are really only good at distributing explicit knowledge, the kind that can be captured and codified for general use. They're not very good at transferring implicit knowledge, the kind needed to generate new insights and creative ways of tackling business problems or opportunities. The authors suggest another approach, something they call T-shaped management, which requires executives to share knowledge freely across their organization (the horizontal part of the "T"), while remaining fiercely committed to their individual business unit's performance (the vertical part). A few companies are starting to use this approach, and one--BP Amoco--has been especially successful. From BP's experience, the authors have gleaned five ways that T-shaped managers help companies capitalize on their inherent knowledge. They increase efficiency by transferring best practices. They improve the quality of decision making companywide. They grow revenues through shared expertise. They develop new business opportunities through the cross-pollination of ideas. And they make bold strategic moves possible by delivering well-coordinated implementation. All that takes time, and BP's managers have had to learn how to balance that time against the attention they must pay to their own units. The authors suggest, however, that it's worth the effort to find such a balance to more fully realize the immense value of the knowledge lying idle within so many companies.     

Business Process Modeling from the Control Perspective: The AI Planning Approach

This paper proposes a new approach for modeling business processes using the AI-Planning paradigm. Based on the concepts of agents, actions, constraints and goals, the AI-Planning approach allows explicit representation of various types of internal controls. Different threats to business processes, such as fraud, can be modeled as planning tasks—that is, finding a sequence of actions that intend to achieve a defined set of goals. Applying modeled threats to models of business processes, a planning reasoner can generate hypothetical scenarios of exposures. Because of its ability to explicitly represent threats, controls and exposures, we argue that the AI-Planning approach is useful for business process modeling from the control perspective.© 1997 John Wiley & Sons, Ltd.     

How to identify your enemies before they destroy you

We've all heard the stories about corporate giants who ignored disruptive innovations and paid a steep price: Think what the personal computer did to Digital or Japanese economy cars did to the Big Three automakers. Big companies now spend a lot of time and money trying to make sure they don't get blindsided by their smaller, leaner counterparts. But it's not easy to distinguish genuine threats from also-rans as they emerge. Most of the nascent technologies that typically bombard executives will not amount to competitive threats and deserve to be ignored. As a result, disruptions are usually not taken seriously until they become obvious--when it's often too late. A disruptive innovation is a technology, product, or process that creeps up from below an existing business and threatens to displace it. Usually, the disrupter offers lower performance and less functionality at a much lower price. The product or process is good enough to meet some customers' needs; others welcome the disruption's simplicity. Gradually, it improves to the point where it displaces the incumbent. But, the authors argue, disruption isn't inevitable. They have developed a tool that can help companies detect potential disruptive innovations while management still has time to respond effectively. The tool's decision-making methodology harnesses the organization's collective wisdom to determine how likely it is that a particular innovation will seriously damage an incumbent's business. The methodology has two components: an analytical instrument and an organizational process. There's nothing magical about it--but it gets managers to think systematically about identifying and addressing threats to the core business. And the tool's rigorous approach can spell the difference between flailing around and acting effectively in the face of a serious competitive threat.     

The effect of corporate social responsibility on the branding of financial services

In today's global world, corporate social responsibility (CSR) is increasing public demand for greater transparency from multinational companies. CSR is a new and growing financial risk factor. If it is mismanaged, a firm's corporate reputation can be badly damaged and a direct negative impact on its business and bottom-line may result. Instead of simply campaigning directly against industrial groups and lobbying governments and international organisations to issue new legislation, non-governmental organisations (NGOs) are increasingly putting pressure on the financial services groups and insurance companies. This new global tactic may affect a bank's relationship with its clients and shareholders.There are market benefits and competitive advantages for those companies whose business policies integrate CSR. The growth in socially responsible investments and in CSR awareness among City people persuades some bankers that the most successful firms of the future will be those who proactively balance short-term financial goals with long-term sustainable franchise building. To respond to this challenge, corporations will have to convince citizens they can trust both their brands and the people behind them. In this context, one must recognise that finance brands have been clumsily managed. Nowadays, several big consumer brands are used as societal role models, but they are also the targets of anti-globalisation and anti-logo activists. In order to avoid such an outcome — not to mention corporate mortification — the key social marketing strategy must be to communicate proactively the business activity's raison d'être to opinion leaders and the general public. In general, industry does not yet care enough and many companies are reacting only when put under pressure by public opinion. It is time, however, to market the social raison d'être of a business and indeed to contest its current exclusion from ‘civil society’. Consumer and service sectors lead the field. In view of the downturn of the global economy, more than ever before, CSR branding is of paramount importance to the financial sector if bankers do not want to become the easy scapegoats. It is necessary to make it clear that financial services companies are global citizens too.     

What's a business for?

In the wake of the recent corporate scandals, it's time to reconsider the assumptions underlying American-style stock-market capitalism. That heady doctrine--in which the market is king, success is measured in terms of shareholder value, and profits are an end in themselves--enraptured America for a generation, spread to Britain during the 1980s, and recently began to gain acceptance in Continental Europe. But now, many wonder if the American model is corrupt. The American scandals are not just a matter of dubious personal ethics or of rogue companies fudging the odd billion. And the cure for the problems will not come solely from tougher regulations. We must also ask more fundamental questions: Whom and what is a business for? And are traditional ownership and governance structures suited to the knowledge economy? According to corporate law, a company's financiers are its owners, and employees are treated as property and recorded as costs. But while that may have been true in the early days of industry, it does not reflect today's reality. Now a company's assets are increasingly found in the employees who contribute their time and talents rather than in the stockholders who temporarily contribute their money. The language and measures of business must be reversed. In a knowledge economy, a good business is a community with a purpose, not a piece of property. If, like many European companies, a business considers itself a wealth-creating community consisting of members who have certain rights, those members will be more likely to treat one another as valued partners and take responsibility for telling the truth. Such a community can also help repair the image of business by insisting that its purpose is not just to make a profit but to make a profit in order to do something better.     

Strategy as active waiting

Successful executives who cut their teeth in stable industries or in developed countries often stumble when they face more volatile markets. They falter, in part, because they assume they can gaze deep into the future and develop a long-term strategy that will confer a sustainable competitive advantage. But visibility into the future of volatile markets is sharply limited because so many different variables are in play. Factors such as technological innovation, customers' evolving needs, government policy, and changes in the capital markets interact with one another to create unexpected outcomes. Over the past six years, Donald Sull, an associate professor at London Business School, has led a research project examining some of the world's most volatile markets, from national markets like China and Brazil to industries like enterprise software, telecommunications, and airlines. One of the most striking findings from this research is the importance of taking action during comparative lulls in the storm. Huge business opportunities are relatively rare; they come along only once or twice in a decade. And, for the most part, companies can't manufacture those opportunities; changes in the external environment converge to make them happen. What managers can do is prepare for these golden opportunities by managing smart during the comparative calm of business as usual. During these periods of active waiting, leaders must probe the future and remain alert to anomalies that signal potential threats or opportunities; exercise restraint to preserve their war chests; and maintain discipline to keep the troops battle ready. When a golden opportunity or"sudden death"threat emerges, managers must have the courage to declare the main effort and concentrate resources to seize the moment.     

Strategy and society: the link between competitive advantage and corporate social responsibility

Governments, activists, and the media have become adept at holding companies to account for the social consequences of their actions. In response, corporate social responsibility has emerged as an inescapable priority for business leaders in every country. Frequently, though, CSR efforts are counterproductive, for two reasons. First, they pit business against society, when in reality the two are interdependent. Second, they pressure companies to think of corporate social responsibility in generic ways instead of in the way most appropriate to their individual strategies. The fact is, the prevailing approaches to CSR are so disconnected from strategy as to obscure many great opportunities for companies to benefit society. What a terrible waste. If corporations were to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices, they would discover, as Whole Foods Market, Toyota, and Volvo have done, that CSR can be much more than a cost, a constraint, or a charitable deed--it can be a potent source of innovation and competitive advantage. In this article, Michael Porter and Mark Kramer propose a fundamentally new way to look at the relationship between business and society that does not treat corporate growth and social welfare as a zero-sum game. They introduce a framework that individual companies can use to identify the social consequences of their actions; to discover opportunities to benefit society and themselves by strengthening the competitive context in which they operate; to determine which CSR initiatives they should address; and to find the most effective ways of doing so. Perceiving social responsibility as an opportunity rather than as damage control or a PR campaign requires dramatically different thinking--a mind-set, the authors warn, that will become increasingly important to competitive success.     

An Honorable Harvest: Universal Owners Must Take Responsibility for Their Portfolios

Despite a maturing industry of ESG professionals and coordinated efforts by shareholders calling for more responsible corporate behavior, we continue to see unabated climate and water crises, growing political instability, and continuing abuses of human rights in supply chains. The founder of a movement called The Shareholder Commons argues that to help business to address these systemic challenges, corporate responsibility must move beyond the company‐by‐company decision‐making model. An economy based on market competition cannot rely on individual businesses to adopt basic sustainability rules that take priority over profit. Critical sustainability boundaries must be implemented collectively to be effective. The crux of the problem is that although shareholder returns derive mainly from efficiency and productivity gains, they can also result from careless exploitation of common resources or powerless workers. And the competition for margin and capital makes it difficult for companies to recognize, let alone forgo, profitable exploitation. A sustainable economy demands that we help companies to distinguish between honorable and dishonorable profits, and to find ways to eliminate or offset the latter. The author holds out a model of capitalism that limits the availability of choices that exploit negative externalities and inequality while preserving the principles and practices that create value and a reasonable sharing of gains among all stakeholders. Universal owners—long‐term diversified investors—appear to be in the best position to formulate and enforce such a model, given the current design and practices of our capital markets. Such global investors have the incentive and power to engage in the collective decision‐making necessary for a sustainable economy. The power exerted by institutional investors through their allocation and stewardship of equity capital can be used to insist on more sustainable business practices. Because they are diversified across thousands of companies, universal owners can bypass the competitive bottleneck for margin and capital that holds sustainability back at the company level. These large investors can work together to establish authentic sustainability boundaries for the companies they invest in; and by so doing, they can allow us to leverage all the good work done to date on disclosure and ESG integration, and so realize a world in which companies continue to compete for profits, but also for a truly honorable harvest.     

Toward a 21st Century Social Contract

This article makes the case for a new contract between business and government that will help us address the critical challenge of our time: the globalization of commerce, and its disruptive effects on labor, local communities, and the environment. The authors begin by showing how globalization has created a new playing field for government and business in which our current governance models and a social contract that proved remarkably effective during the 20th century can no longer ensure economic stability and social progress. While the private sector has for the most part demonstrated its ability to adapt and flourish in a global economy, governments have struggled, thanks in large part to complex decision‐making processes and centralized bureaucracies that were created in response to 20th‐century realities. The result has been ever more indebted nations and governments that have been unable to maintain the core foundation and social investments on which their economic competitiveness and the social well‐being of their citizens depend. Our challenge now is to create a new social contract between business and government that is equal to the challenges of a global economy. The authors identify a number of key issues that must be addressed in creating this new framework, and explore recent and emerging business leadership initiatives that are working to address them. These range from initiatives that encourage greater self‐regulation by business of its impact on society and the environment to those that explore ways for the private sector to help governments deliver services more cost effectively. As part of the fallout from the recent financial crisis, business, broadly speaking, no longer enjoys the level of public trust it once did, which has added significantly to the challenges it now faces in taking on greater social responsibility. To direct its considerable resources to the greater public good while continuing to produce a competitive return to shareholders will require a degree of innovation and leadership that many companies will find difficult. But without this increased participation of business and its leaders, it is hard to see how we will prosper in the increasingly uncertain future we now face.     

我国对外贸易存在的问题及对策探讨

改革开放以来,我国在对外贸易方面取得了巨大成就,但也应该清醒地看到,我国在对外贸易方面存在的问题也很多:一是长期以来我国出口企业经营策略趋同现象明显,表现在我国出口企业都热衷于短期趋利行为,竞争策略过于单一并且习惯采取统一的经营管理模式;二是入世以来我国的出口贸易受技术性贸易壁垒限制严重;三是我国将迎来贸易摩擦频发期。针对我国对外贸易存在的诸多问题,我国政府应该努力为企业创造公平竞争的市场环境,出口企业应该不断强化自身经营策略的创新性,在市场定位、管理和服务等方面的经营策略上保持创新性;推进对外贸易发展方式的转变,提高出口商品质量、信誉和效益。     

Women's roles and the great world transformation

The constructive worldwide processes of reform that have brought about, among other things, a reversal in attitudes towards birth control, sex, women's rights, marriage, and the family are competing with the disasters of famine, war, and economic collapse as the old structures break down under new global problems. If we are to survive, thousands of problems must be solved and our efforts “orchestrated” so as to fit together, at every level from personal awareness to global management. Women must identify the many areas of special concern to them, where their new analyses and reform efforts are needed to reverse the false goals and practices of centuries of male-dominated societies. One example is the crucial need for new analyses and design efforts for improved family structures.     

If you wanted to know the future of small business what questions would you ask?

Small business is a relatively new economic category, which became politically necessary as economic activity flowed from owner-managed enterprises to managerial corporations. Historically, all business operated at a small scale and were centred on the individual artisan. Even now there are strong cultural affinities to individual enterprise. Over the centuries, business has emerged, legitimised by reflexive social notions of entrepreneurship and fuelled by regulated international free trade, competition, property rights and usury. In the process, society’s view of how this market structure serves the individual is increasingly depersonalised, demanding self-reliance and responsibility of the individual separate from the economic institutions that they work for. In this landscape, small businesses are increasingly important but relatively powerless. Questions concerning their future ultimately focus on the role they play in personal and social relationships.     

From authenticity to significance: Tourism on the frontier of culture and place

The tourism of the future will include greater demand on the part of citizens of economically emerging nations, as well as on the part of a growing number of retirement age persons in many of the more developed countries. There are important environmental, cultural, and social consequences associated with these demographic shifts. Trendsetters for the tourism of the near future are likely to be well-educated elites who are familiar with travel and comfortable in culturally diverse situations. They will have an understanding of the consequences of global economic development, and will better realize that their participation in tourism comes with a cost to communities and environments through which they pass. They will see value in tourism experiences that support principles of environmental sustainability, heritage preservation and cultural diversity, and human equality. This generation of tourists will have greater choice of travel venues and access to considerably more information on which to base their travel plans, and they will be more likely to expect travel experiences that have breadth as well as depth and that provide opportunities for self-improvement as well as leisure and entertainment.     

Disruptive change. When trying harder is part of the problem

When a company faces a major disruption in its markets, managers' perceptions of the disruption influence how they respond to it. If, for instance, they view the disruption as a threat to their core business, managers tend to overreact, committing too many resources too quickly. But if they see it as an opportunity, they're likely to commit insufficient resources to its development. Clark Gilbert and Joseph Bower explain why thinking in such stark terms--threat or opportunity--is dangerous. It's possible, they argue, to arrive at an organizational framing that makes good use of the adrenaline a threat creates as well as of the creativity an opportunity affords. The authors claim that the most successful companies frame the challenge differently at different times: When resources are being allocated, managers see the disruptive innovation as a threat. But when the hard strategic work of discovering and responding to new markets begins, the disruptive innovation is treated as an opportunity. The ability to reframe the disruptive technology as circumstances evolve is not an easy skill to master, the authors admit. In fact, it might not be possible without adjusting the organizational structure and the processes governing new business funding. Successful companies, the authors have determined, tend to do certain things: They establish a new venture separate from the core business; they fund the venture in stages as markets emerge; they don't rely on employees from the core organization to staff the new business; and they appoint an active integrator to manage the tensions between the two organizations, to name a few. This article will help executives frame innovations in more balanced ways--allowing them to recognize threats but also to seize opportunities.     

Multiagent systems for workflow

Workflows are ubiquitous in business computing. They arise not only within an enterprise but increasingly across enterprises as well—in situations such as virtual enterprises and applications such as supply-chain management. Although the importance of workflows as a basis for understanding and automating business activities is widely recognized, current workflow practice leaves much to be desired. To a large extent, this problem arises because of the rigidity of current technology, which does not accord well with the complex, heterogeneous, dynamic environments in which workflows are applied. Agent technology promises to alleviate many of these problems and hence enable adaptive workflows in realistic settings. We consider interaction-oriented programming (IOP), an approach to software engineering based on multiagent systems that we have been developing. We focus on one aspect of IOP, which deals with social commitments and enables agents to flexibly enact a multienterprise workflow by entering into and behaving according to their commitments to each other. The agents can cancel or modify their base-level commitments only if they satisfy the metacommitments that then go into effect. Copyright © 1999 John Wiley & Sons, Ltd.     

Selection bias and the perils of benchmarking

To find the secrets of business success, what could be more natural than studying successful businesses? In fact, nothing could be more dangerous, warns this Stanford professor. Generalizing from the examples of successful companies is like generalizing about New England weather from data taken only in the summer. That's essentially what businesspeople do when they learn from good examples and what consultants, authors, and researchers do when they study only existing companies or--worse yet--only high-performing companies. They reach conclusions from unrepresentative data samples, falling into the classic statistical trap of selection bias. Drawing on a wealth of case studies, for instance, one researcher concluded that great leaders share two key traits: They persist, often despite initial failures, and they are able to persuade others to join them. But those traits are also the hallmarks of spectacularly unsuccessful entrepreneurs, who must persist in the face of failure to incur large losses and must be able to persuade others to pour their money down the drain. To discover what makes a business successful, then, managers should look at both successes and failures. Otherwise, they will overvalue risky business practices, seeing only those companies that won big and not the ones that lost dismally. They will not be able to tell if their current good fortune stems from smart business practices or if they are actually coasting on past accomplishments or good luck. Fortunately, economists have developed relatively simple tools that can correct for selection bias even when data about failed companies are hard to come by. Success may be inspirational, but managers are more likely to find the secrets of high performance if they give the stories of their competitors'failures as full a hearing as they do the stories of dazzling successes.     

The work of leadership

More and more companies today are facing adaptive challenges: changes in societies, markets, and technology around the globe are forcing them to clarify their values, develop new strategies, and learn new ways of operating. And the most important task for leaders in the face of such challenges is mobilizing people throughout the organization to do adaptive work. Yet for many senior executives, providing such leadership is difficult. Why? One reason is that they are accustomed to solving problems themselves. Another is that adaptive change is distressing for the people going through it. They need to take on new roles, relationships, values, and approaches to work. Many employees are ambivalent about the sacrifices required of them and look to senior executives to take problems off their shoulders. But both sets of expectations have to be unlearned. Rather than providing answers, leaders have to ask tough questions. Rather than protecting people from outside threats, leaders should let the pinch of reality stimulate them to adapt. Instead of orienting people to their current roles, leaders must disorient them so that new relationships can develop. Instead of quelling conflict, leaders should draw the issues out. Instead of maintaining norms, leaders must challenge "the way we do business" and help others distinguish immutable values from the historical practices that have become obsolete. The authors offer six principles for leading adaptive work: "getting on the balcony," identifying the adaptive challenge, regulating distress, maintaining disciplined attention, giving the work back to people, and protecting voices of leadership from below.