Wednesday, February 3, 2010

"A Rallying Cry for CSR" - The CSR Journal

Here is my summary from our "Top Risks" event last month at Carnegie Council, published in The CSR Journal (Volume 5), which is edited by Michael Levine, co-chair of the ABA's CSR Committee. It is republished here with kind permission.

A Rallying Cry for CSR?

By Devin Stewart

One day after Google's bold decision last month to stop censoring its Chinese search engine and possibly quit its operations in China, Carnegie Council held its annual "Top Risks and Ethical Decisions" panel for 2010. Google's announcement and the earthquake that hit Haiti, two unexpected events with moral consequences, guided much of the panel's discussion.

The salience of the Google announcement was heightened by the foresight of Eurasia Group president Ian Bremmer who had placed U.S.-China relations as the 2010's top risk in terms of likelihood of change. It also highlighted the ethical challenges of doing business in China and globally as well as the positive leadership role businesses can play. Bremmer told me before he presented his full list of risks that he predicted Google would indeed pull out of China given the company's wide range of appeal—from technologists to free marketers to human rights activists—and the Communist country's inability to credibly guarantee security from further cyber-attacks. Google, along with at least 20 other companies, had been hacked in December, and it is widely believed the attacks were in coordination with a Chinese government agency that was attempting to gather information on dissidents. If personal information were compromised, peoples’ lives would be at stake. Business ethics are a very practical matter.

Bremmer wondered whether Google's moral stand might serve as a rallying cry for other companies to follow suit in China. Since Google's announcement, the company has been lauded, and the U.S. government has had to reverse its direction by stepping up its rhetorical pressure on China. In U.S.-China relations, the news came against a backdrop of tensions over possible UN sanctions on Iran, U.S. arms sales to Taiwan, and a Chinese test of a missile interceptor. It also occurs amid the longer-term trends Bremmer sees, specifically the acceleration of divisions between the world's developing and developed countries; free market economies and state capitalist economies; and the U.S.-led and multipolar worlds. Bremmer sees U.S.-China relations as the biggest risk for the year because "U.S. and Chinese economic systems are fundamentally incompatible. Compromise is a possibility but let's not obscure the question." He also noted that it isn't clear how the world will square China's global responsibilities given its limitations and societal pressures.

The Google episode in China also underscores the gap between short-term profit-seeking and longer-term ethical concerns for companies and countries alike. Without an expansion of rights and freedoms in China, the government risks hindering economic development. Without free press, for example, China simply cannot stem corruption. Above all, Google's move has expanded the options and the debate on the Chinese market. Carnegie Council's approach toward exploring international issues has been precisely that: to expand the scope of options and to encourage people to ask ethical questions. In line with Andrew Carnegie's vision, the Council aims to create and disseminate knowledge and understanding in order to facilitate societal transformation toward world peace. The "Top Risks" event is part of an ongoing series that brings companies and civil society together to examine business ethics issues, such as human rights policies, the role of the media, trust in the financial system, green job creation, and the fight against corruption.

Michele Wucker, head of the World Policy Institute, posed one of these potentially transformational questions. Considering the ecological limits of the planet, how much consumption is enough? China has just become the largest automobile market in the world, but do we really believe that every person in China can own a car? If the United States moves away from naked consumerism, what will take its place? And, how do we avoid policy solutions that hurt the poor? Wucker also pointed to the extreme poverty in Haiti, which exacerbated the devastation from the recent earthquake, highlighting the fact that risk is often increased when more than one factor is in play. Wucker predicted that finding sustainable levels of consumption and a balance between short-term and long-term gains would be the most pressing moral questions facing businesses for the foreseeable future.

A major obstacle to finding this balance, however, relates to the very nature of individuals and institutions, something that strategy+business editor Art Kleiner has been following for years. He identified at least three "meta risks" for 2010. The first is that although the stakes are higher than ever, it is unclear whether governments possess the management capacity to deal with the riskiest challenges, such as climate change and terrorism. The second is what he called "the risk of transitional capability," meaning that not only are changes in the global business environment occurring more rapidly than ever, it is also uncertain whether organizations can adopt the best practices in time to keep up with the changes. Moreover, transition implies unintended consequences and thus more uncertainty. Finally, bringing it to the personal level, there is a plausible scenario in which the world addresses these problems, but it will require individuals to change their behavior. It is becoming increasingly difficult for people to lead a "normal life," so what do you do? Kleiner asked. "To the extent that human survival requires individuals to change, will enough people be willing to do it? Maybe," he said.

"Integration" has already become the buzzword in business and policy circles this year. In applying this concept, Georg Kell, head of the UN Global Compact, explained that integration means companies must be best in class in their products and services but that isn't enough. Companies must also be able to deal with non-financial risk, such as environmental, social, and governance risks. Ethics is the floor or baseline for international business because "going global means going local," and globalization has therefore become a test case for the question, "Can we live with one another?"

Kell was optimistic about humanity's prospects because he believed the 2008 financial crisis brought ethics back into business decisions in at least three ways. First, it highlighted the need to move from short-term to long-term value creation. Second, it showed the importance of bringing non-financial issues into decision-making. Finally, he saw a general shared sense of ethics as underpinning these trends. His research has shown that there is a universal sense of fairness and justice around the world that can also be observed in religious traditions, philosophies, and law. Kell concluded by advocating for the "traditional values," such as cooperation, that made the free market work in the first place.

The panel seemed to agree that only human innovation can pave the path toward global salvation in the face of ecological, security, social, and economic risks. Thomas Stewart, Booz & Company’s chief knowledge officer, somewhat darkly concluded by encouraging people to find the courage to muddle through. He jokingly asked whether it is possible to avoid the future all together. Kleiner quipped, "There is always a way through by the skin of our teeth." The event also highlighted the large moral questions for the upcoming year, thus framing the fourth year of Carnegie Council's Workshops for Ethics in Business series programming, which is currently being expanded into a full-blown corporate membership program. If ethics matter to you and your organization, please contact us to get involved with this unique program.

Stewart is program director and senior fellow at Carnegie Council for Ethics in International Affairs and can be reached at


Max said...

Very informative...some thoughts on ethics:

Ethics is concerned with "doing the right thing" but...

Moral standards differ between individuals depending upon their upbringing, traditions, religion, social and economic situations, and so on. Hence, the existence of grey areas. Therefore, state the “moral” problem in a simple manner and review feedback so that an acceptable decision can be made with minimal overall harm/loss—i.e., we are concerned with “Pareto optimality,” which is related to the net balance of benefits over harm for society as a whole.

Economic theory is concerned with the efficient utilization of resources to satisfy consumer wants and to maximize profit and satisfaction. Pareto optimality exists at the point where it is impossible to make any given individual better off without harming another given individual. Although most businessmen believe that profits and cash flow are very important, there has been a move toward the recognition of social responsibility.

The blind pursuit of profit has resulted in bribes, environmental problems, injured workers, unsafe products, closed plants, and so on—this is unethical. Many business schools emphasize the philosophical, rather than the practical aspect of ethics. We need a practical approach to the solution of ethical problems.

Ethical leadership calls for morals, fairness, caring, sharing, no false promises or unreasonable demands on others, etc. Is “ethical leadership” an oxymoron?

I have a policy of distributing free abridged versions of my books on leadership, ethics, teamwork, motivation, women, bullying and sexual harassment, trade unions, business law, etc., to anyone who sends a request to

Maxwell Pinto, Business Author

Parag said...

Once training, measurement and a new ethical code have been developed, companies are also hiring full-time ethical compliance officers, and starting ethics hotlines to report possible policy violations. Hiring a full-time ethics officer is another signal to employees that ethical violations will be taken very seriously. However, this person isn't just a watchdog-they will take a proactive approach to identifying possible violations before they develop. An ethics violation hotline is another essential step to ensure ethical compliance.
Importance of ethics in business