CSR and Conflict

It’s actually worthwhile to stop for a second and remember that poverty and climate change are intrinsically linked. As we have seen, World Bank, IMF and lots of UN efforts are not producing results on eradicating poverty and in creating sustainable livelyhoods. That’s not a criticism against them, but rather against their role as being a political football (thanks to Michael Hopkins for that term) in a game that still has too many bad actors, bad governments and of, course, bad business.

However, Hopkins stresses, and I couldn’t do more than repeating, that

“the future catastrophe will lead corporations to focus more on their carbon footprint than on their development footprint”.

As conflict is not only intrinsically linked to both climate change and development but indeed the work on it may often provide the missing link itself, we all know that there’s still some way to go on that road of “the role of business in conflict”.

Why watch telly-on-the-wee-screen when it’s on TV, dummy? Apart from that I anyway had to soft-fiddle for half an hour to NOT getting sound out of the machine (I normally use iTunes but that doesn’t seem to work here, as the download is sponsored by Mr. Bill…).

Anyway, I’m happy we still held on to a TV-licence - good to see, too, that there’s wee TV-newschannel N24 broadcasting the entire 24 hours LIVE… (I know they barely make a living, but they have great staff and lots of spirit). Well done. Paul Kelly and Missy Higgins just gave a great performance at the Aussie-Stadium, singing the Paul Kelly tune about big things - and now the kids are awake, too

Freeman presents ideas that are forthcoming in Freeman, Harrison and Wicks, “Managing for Stakeholders”, which will be published in 2007. His core proposition is “Business is all about value creation and trade”. In his opinion, “capitalism” refers to a number of different debates in society: Often the term is confusing and opaque. He’s stating that, if we think about how a society can sustain a system of voluntary value creation and trade, then capitalism can be beneficial. And he highlights traditional models of capitalism, portraying markets as the main metaphor for most models of business. However, what does it help a business, to think about creating value in trade, he asks. And: What does the entrepreneur do?

Economies work in part, “because there always is a better way to start”. However, the problems with competition are captured by four arguments: the global, historical, societal framework, and the human nature argument. Historical: Value creation and trade has emerged in a time *before* the nation state. The traditional idea is that capitalism works because people compete with each other - and that entrepreneurship must relate to the concept of a singular, egotistical entrepreneur. Freeman thinks this is wrong.

Following up on this, he remarks: How can we have an ethical theory separated from business, if we always have been value creators and traders? The overall internalised presumption is that business is morally questionable - without realising the benefits of business. And thus, businessmen are mostly interested to answer the question “what do you stand for” rather than “what business are you in”.

To Freeman, capitalism is a system of social cooperation. It is about how to create value for each other - something that no-one does on their own. And exactly this is, why capitalism works. We have simply forgotten that business works because we can work together and because we have joint interests. He calls this “stakeholder co-operation”.

In addition to this, “stakeholder responsibility” is needed to create, trade and sustain value: parties agree that they accept responsibility for the consequences of their actions. When third parties are harmed, they must be compensated, or a new agreement must be negotiated with all of those parties who are affected.

Value can be created, traded and sustained because human beings are complex psychological creations, capable of acting from many different values and points of view. Economists ignore a lot of what we already know about human behaviour. They talk about “rewards and punishments” and ignore that human beings have complex emotional lifes. Freeman states: this exactly, this complexity is the reasons why business works. That’s where capitalism starts. And this is stakeholder engagement, adding to stakeholder responsibility and stakeholder co-operation. So, according to Freeman, the classical and scholarly debate between Freeman and Friedman is “beside the point”:

“Stakeholder engagement is the essence of what business is all about.”

Update: Freeman’s keynote.