Analyzing Responsibility in Business Management
Meaning of Responsible Management
Responsible management has become very crucial in an era of growing governmental and public scrutiny of managerial practices and accountability. During the past years, a succession of instances of poor managerial practices, or even malpractices, unethical behaviour and questionable bonus and incentive systems presented themselves. Some of these instances, which have resulted in the bankruptcy of individuals and corporations leading to low levels of customer trust and rising levels of dissatisfaction in the society, and perhaps (even to economic crisis). For example, financial services have come under governmental and public inspection with respect to incentive systems that encourage customer-facing employees to bend or ignore fiduciary obligations to the benefit of the company, obviously at the expense of the customer. To Peter Drucker, three domains of responsible management exist: sustainability, responsibility, and ethics.
What does a responsible manager do or what are his or her tasks? What skills does the responsible manager need or how does the responsible manager change the company environment? How does the responsible manager plan, organize, lead, and control responsible business performance? When all these questions are answered, it will give a vivid understanding of the concept of responsible management. “Responsibility for social impacts is a management responsibility—not because it is a social responsibility, but because it is a business responsibility and managers must convert society’s needs into opportunities for profitable business.” (Peter Druker). In order to answer the above questions, we must understand the types of responsibilities potentially fulfilled by managers, and then examine what managers must do to fulfill them.
The world’s current ailments, issues and crises (including social injustice and environmental destruction) have been blamed on main-stream management practices and also management has been criticized from very many perspectives. The expectation is that management and its impact on business can leave from being a source of problems to becoming a source of solution. It should be noted that responsible management takes hold of responsibility for the triple bottom line – sustainability, shareholder responsibility and ethics (moral dilemmas).
Sustainability is management activity which is sound and positive, protecting, creating and sustaining social, environmental, and economic business. Responsibility should be management activity that leads to the optimization of the overall stakeholder value (SV), instead of the narrow focus on maximizing shareholder value. Ethics is when decisions in management are morally desirable in both process and outcome. Management practice must be made of two main things – ethical decision making and the creation of moral excellence.
In my opinion, responsible management is an aspect or a part of the subject of Corporate Social Responsibility (CSR). A firm grasp of the concept of CSR will ease the understanding of responsible management. In a nutshell, it is seeking and trying to balance the interests of the entire world (people, companies, environment) to prosper for the benefit of both current and future generations. Therefore, responsible management involves minimizing negative environmental social and cultural impacts; generating more economic benefits for the local people and enhancing the wellbeing of the host communities by improving working conditions and access to the industry.
It also means involving local people in decisions that influence their lives and life chances, and the making of positive contributions to the preservation of natural and cultural heritage and to keep world’s diversity. Stakeholder influence is not taken lightly in responsible management, thus seen as very vital.
Whether dairy farmer or worker, a person of color or someone escaping an area of conflict, people want to be safe and secure. People deserve their human rights and a dignified, equitable place in life. We are living in times when we need to challenge ourselves to take stock and ask what can we each do to build a fairer and equitable world – this is a picture of responsible management. Corporations and businesses are encouraged to behave socially responsibly on many societal issues (Welford & Frost 2006; Engle 2006), a lot of uncertainties as to how CSR is to be defined in both the corporate and the academic world. Definitions according to Van Marrewijk (2003) are biased toward specific interests, hindering development and implementation of the CSR concept, leading to people talking about CSR differently.
CSR concept can be approached from many sides. Professor Joseph DesJardins from the College of Saint Benedict and Saint John’s University Corporate Social Responsibilit (CSR) defined CSR as the responsibilities a business has to the society in which it operates. He explains that businesses have these social responsibilities: obedience to the law, the production of goods and services that society demands. To what extent does a business have responsibilities to the society that goes beyond obeying the law and producing goods and services? Kotler and Lee (2005) defined CSR as a commitment to improve community well-being through discretionary business practices and contributions of corporate resources. The word discretionary is key to this definition because it’s about the voluntary commitment a business makes in choosing and implementing practices, and making contributions. Not business activities imposed by the law or that are moral and ethical by nature and therefore expected to be carried out by the company.
Even though businesses demonstrate their commitment to CSR (Pinkston & Carroll 1994), many struggle with this effort (Lindgreen et al. 2009). It may be as a result of how CSR has developed and this development can be likened to the influence of many theories like agency theory, institutional theory, the resource-based view of the firm, stakeholder theory, stewardship theory, economic theory, the theory of the firm and many others (McWilliams et al. 2002; Carroll 1979; Wartick & Cochran 1985; Windsor 2006). All these have resulted in various conceptualizations of CSR (Pinkston & Carroll 1996; Snider et al. 2003).
Economic model says that business fulfills its social responsibility by obeying the law and the production of goods and services, and they have no social responsibility beyond that (anything beyond that is a violation of its social responsibility). The Philanthropic Model of CSR says, like individual’s businesses are free to contribute to social causes as a result of charity, businesses have no strict obligation to contribute to social causes same as an individual has no strict obligation to contribute to charity. Those who counteract this model say that: The different motivation is what makes a company an ethically responsible business and the other, not.
The Citizenship Model (or the Social Contract Model) of CSR mentions that a business, as a citizen to the society in which it operates (e.g. local communities, states, counties and countries) must conform to ethical and social responsibilities which we all face. Here social responsibility is seen as a contract – society grants business certain rights and in return business must fulfill certain expectations. The Stakeholder theory begins with the recognition that every business decision affects a wide variety of stakeholders – government, employees, competitors, media and so on, recognizes that every business decision imposes cost on someone and benefits others, and mandates that costs and benefits be acknowledged. The Strategic Model of CSR sees social responsibility as part of the essential mission of the firm and is interwoven into the fabric of the firm – one serves the end of the shareholders by serving the firm, quite the opposite of the economic model.
Notice that the developmental history of the CSR construct can be divided into the following phases: (1) rise and extension (1950s), (2) further expansion (1960s−1970s), and (3) full-fledged proliferation (1980s−1990s) (Carroll 1999). Advocators of CSR have utilized four main arguments to justify their case for CSR: moral obligation, sustainability, license to operate, and reputation.
In accordance to moral obligation, companies have to be good citizens and do right, sustainability hinges on environmental and community stewardship (having the future generation in mind when meeting the needs of the present generation). Notion of license to operate means every company needs permission from the government, communities and other stakeholders to be involved in business. About reputation, many companies justify CSR initiatives on the platform that they will mend a company’s image, beef up its brand, enliven morale, and increase the value of its stock. All these justifications have advanced thinking in the field, but what is the guidance with respect to the tough choices corporate and business leaders have to arrive at? (Porter & Kramer 2006).
According to Porter and Kramer (2006), these schools of thought focus on the tensity between business and society and not on their interdependence. The general principle created is not bound to the strategy and functionings of any specific company, and also where they operate. Therefore, a company can’t be helped to identify, prioritize and address the social issues that matter most, by none of them.
The mutuality between businesses and society can take two forms: a company encroaches upon society through its activities in the normal course of the business (inside-out linkages) or through external social conditions influencing corporations for better and for worse (outside-in linkages). Businesses will make the most meaningful impact and harvest the greatest business benefits through strategic CSR. To some companies, it is doing thing differently from competitors (lowering costs or better serving a particular set of customer needs). This is an operational challenge for the business where it lessens the harm that springs from its value chain activities. To other companies, strategic CSR has to do with acting as a good corporate citizen that adjusts to the evoking of social concerns of stakeholders and also solving present and possible unfavourable effects from business activities.
Corporate Responsibility in Ben&Jerry’s Ice Cream Company
Ben & Jerry’s, acquired by the multinational consumer goods organisation Unilever in 2000 is a social enterprise that has been globally commended for its involvement in CSR activities (the organisation has been granted many awards for its commitment). Ben Cohen and Jerry Greenfield started their first ice cream shop on May 5, 1978, in a converted gas station in Burlington, Vermont and invested $12,000 in secondhand equipment. Their business has grown to be very successful with a favoured level of brand-name recognition for the firm’s internationally distributed frozen dessert products, including ice cream, frozen yogurt, and sorbets. The company has 337 franchise or “scoop shops” in the United States, United Kingdom, Holland, France, Israel, Spain, and Lebanon.
Absorbing a strong sense of social responsibility to their employees, the community, and the world at large, the company has three mission statements (product, economic and social) and all three parts must thrive equally to command huge respect for individuals in and outside the company, and also support the communities which they are a part. This is a summary of the three mission statement.
Social Mission Statement: ”To operate the Company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community – local national and international”.
Product Mission Statement: ”To make, distribute and sell the finest quality all natural ice cream and related products in a wide variety of innovative flavors made from Vermont diary products”.
Economic Mission Statement: ”To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders and creating career opportunities and financial rewards for our employees”.
In their CSR report, B&J’s bring to spotlight the consistency of its CSR engagement by developing an ongoing perspective (Stillar 1998). The organisation emphasizes that its CSR engagement does not stand on a completed basis or at the level of paper only, but is dominant in the company’s values and ways of doing business.
The practical actions carried out by Ben & Jerry’s are:
Most summers, the Ben & Jerry’s Foundation offer grants of up to about $20,000 to Vermont-based non-profit organizations active to handle the economic, social and environmental impacts of poverty.
Workers’ Rights: In 2017 the company signed the first-ever worker-driven labor program (that they know of) in any dairy supply chain in the world. It came after many months of working towards that end. They agreed to be the first company to sign up to the Milk with Dignity program, founded by the Vermont-based non-profit Migrant Justice. And this wasn’t a finish-line moment for them, but instead, it was a starting point.
Racism & Refugee Asylum: 2017 was a remarkable year because the company intentionally stepped into the deeply complex issues of systemic racism in the United States, refugee asylum and resettlement in Europe, marriage equality in Germany and Australia (among other countries), LGBT rights in Japan (and other countries), air quality and clean fuels in Brazil and many other issues within the communities where they do business.
Climate: The company continued the drumbeat for countries around the world to stick to their commitments. This was made in Paris at the COP21 summit to implement a global plan that changes the course of our changing climate. They are also looking inward to determine their best path to reduce carbon 40% by 2025 and 80% by 2050 (% carbon intensity per pint) within the most challenging parts of their extended value chain.
”Whenever issues confronting the social, economic and environmental systems that the company has created are addressed, it invariably requires a shift in power. How can social, political and economic systems that share power among the stakeholders within that system be achieved? ”Whenever there is a shift in power there is discomfort, suspicion, anxiety even anger. But as the light of human rights shines through the prisms of collaboration, transparency and perseverance, it illuminates the path towards something better. We believe we are on that path at Ben & Jerry’s, says the CEO.
Working Inside Out: Internally for the Ben & Jerry’s global employee community the stage was set for 2017 to be turning point culturally. Understanding that what they did yesterday wasn’t good enough for what they will want to accomplish tomorrow, so what could be done today to help get to the company’s global vision as an inclusive, diverse, equitable, interconnected company? A company that is internally on a path towards equity and externally on that same path in each community where business is done and truly stands for social, environmental and economic justice. Also, a company that has the boldness to question itself if it’s truly living up to its own Mission and Values statements and is courageous to do the things internally and externally to make its Linked Prosperity business model more real every day.
The company was so focused on achieving the 7th Millennium Development Goal – ensure environmental sustainability. It is important to mention that it is difficult to achieve the other MDGs (now the Sustainable Development Goals) without protecting mother earth and making careful use of natural resources, bases of life, and also retaining biological diversity. To Ben & Jerry’s foundation, the interest is in furthering social justice, protecting the environment and supporting sustainable food systems. Through innovative recycling attempts the environment is taken into grave consideration (selling waste). Mind you, Ben and Jerry’s are still selling dangerous products for health (butter fat ice cream), even with their huge efforts on CSR.
The Vermont Dairy Farm Sustainability Project launched by Ben & Jerry’s in 1999, developed a practical method that could be used on typical dairy operations to safeguard water quality from nitrogen and phosphorus run-off, not sacrificing the economic viability of the farm (making the farm a sustainable business). They’ve been making efforts to reduce environmental impacts, in addition to their greenhouse gas emissions. With the challenges that come with climate change, they take into account their largest emission sources, and create tangible strategies on how to reduce them to the lowest.
Opening up a small startup company called CoClear particularly for a life cycle analysis (LCA) study of their products, they took a product, for example, thirty flavors of ice cream, used sophisticated databases and math equations, detected the carbon emissions for all the ingredients, manufacturing, transportation, even retail. The learning is that, each pint made adds up to three pounds of CO2 emissions to the atmosphere. To better explain, a medium car releases around one pound of CO2 per mile driven.
Ben & Jerry’s Manager of Natural Resources said, “Doing this makes us understand our greatest source of greenhouse gas emissions. Telling the public to reduce their carbon footprint, needs us to know what our own footprint is, so as to reduce them.” CoClear’s study makes space for an in-depth picture of the release of each stage of their ice cream’s “life cycle.” The information gauges production scenarios that maximize efficiency for each flavor – let’s say, manufacturing Chocolate Chip Cookie Dough ice cream at the plant closest to the place where the actual cookie dough is created could cut down transportation costs and emissions.
Most people will talk about refrigeration and trucking if asked where the carbon footprint in a pint of ice cream is, says the Social Mission Activation Manager, Ben and Jerry’s. LCA study proves that 41% of Ben & Jerry’s total carbon footprint can be traced to the cows that create the common ingredient in every Ben & Jerry’s flavor cream. About climate change, the methane from the front and back ends of cows is approximately 21 times stronger than C02, making manure management a huge opportunity for improvement. The nitrous oxide connected to fertilizers appears not in the same quantity as methane, but available at 300 times stronger than CO2. This gas is another area where farmers need to be helped to lessen their use. “Knowing that dairy is significant and having numbers, targets can be set and worked on towards reducing the source of GHG emissions with creative solutions. Technologies that enhance the value and use of manure on the farm will be included,” says the Manager of Natural Resources.
At the level of the ”Materials” section of the company, B&J’s emphasizes the regular nature of improving procedures to do well for the environment. They say, ”We are confident, we can continue to make better our primary packing materials in the future year”. Regrettably, like numerous other corporate giants, Ben & Jerry’s is tirelessly supporting industrial dairy, an industry which is so damaging to the cows and the farmers.
Conclusions and Development Suggestions
Ethical leadership is an aspect of CSR in B&J’s. Though ethical standards are not universal, which means social and cultural differences will determine acceptable behaviors at the workplace or with employees. From the beginning the conditions in which the employees (which are dominant stakeholders) worked, got better as the financial status of the B&J’s improved. Leading by example is the target of B&J’s (which they do), is made possible by establishing codes of ethics and decision rules, providing ethics training, hiring employees with high ethical standards and also providing support for workers facing ethical dilemmas.
Idealism (one’s concern for the welfare of others) is practiced in this company because of shared values in companies or organizations which aren’t against moral and ethical principles. The company endeavours to execute CSR in the whole value chain, from the supply chain to marketing and this has made B&J’s a very notable company in terms of social responsibility as recognized by its social activism and environmental responsibility.
Ben & Jerry’s has moved to cut all glyphosate-tainted ingredients from its production chain and has introduced an “organic dairy” line. This was after a new survey found extensive traces of the controversial substance in its European ice-creams (a huge concern for the consumer stakeholder group). Glyphosate being one of the most wide-ranging used herbicides in agriculture and is found everywhere – from mainstream food to natural and organic food and even rainwater, was also found in their products. The herbicide is commonly used on crops such as wheat, barley, oats and peanuts, making it likely that it came from B&J’s cookie dough, peanut butter or other added ingredients.
The Health Research Institute (HRI) laboratories found traces of the weedkiller in 13 out of 14 B&J tubs sampled in the UK, France, Germany and the Netherlands. Other B&J flavours that tested positive for glyphosate in France, Germany and the Netherlands were: Karamel Sutra Core, Cinnamon Buns, Cookie Dough and Topped Chocolate Caramel Cookie Dough. In addition, there has been multiple shareholder lawsuits filed during the Ben & Jerry’s acquisition, in contrast to the bid by the social investors which was less lucrative than the Unilever bid, and claiming that the board of directors was not acting in the best interest of the corporation, shareholders and stakeholders.
From an ethical perspective, Ben & Jerry’s board of directors may have been stuck to consider the impact of a sales transaction on all stakeholders, employees and customers inclusive. In the actual deal, Ben & Jerry’s board of directors did negotiate a number of provisions aimed at protecting various stakeholders and the social mission of the company. Those protections included: creating an autonomous board for Ben & Jerry’s; committing to maintain certain of Ben & Jerry’s charitable donations; keeping Ben & Jerry’s operations in Vermont for at least five years; avoiding material layoffs for at least two years; donating $5million to the Ben & Jerry’s Foundation; and paying $5 million in employee bonuses.
I recommend that as the company is making efforts on the ecology (waste management, packaging), they should communicate it to their stakeholders. Also, the company is involved in too many CSR actions (even if they are coherent for each of their activities) and the risk of dilution is high. Management must be careful about not creating too much unnecessary activities. ”Making and selling the highest quality ice cream profitably in a competitive marketplace is not easy at all, therefore doing it in line with the Social Mission of the company requires astounding commitment and passion from everybody in the Ben & Jerry’s community”, says the CEO.
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