The social obligations of business

Any topic concerned with the social responsibilities of business seems to draw a lot of heat, particularly from people in the community sector. While lack of trust and suspicion of business has been common for 15-20 years – and of course there are many instances where it has been well founded – it is relatively new that the language of social responsibility or social obligations have been so widely applied in discussions about business. These terms have been present for some time in certain circles but the profile of these concepts is now much more public.

When the McClure report first came out I heard an ABC interview with an extremely annoyed academic talking about the anomaly of including the role of business as part of an approach to solutions. There is the notion that structural changes in companies and the drive for shareholder value are part of the problem so why ask business to be part of the solution without first addressing the causes? I prefer to think the inclusion of business as a separate and active part of social as well as economic life is an important shift in thinking about relations in the Australian community.

The topic is also a hard one for the Australian business community and there is by no means consensus on these issues. There have been many, sometimes heated, discussions behind closed doors trying to tease out the parameters of responsibility and obligations that should or could apply to business. This includes where these obligations sit in relation to the core purpose of business, which is to create wealth, and what social outcomes would be of most value for business and the community.

Our study: corporate community involvement

The centrepiece of this article is a study conducted with the Business Council of Australia of the views and community involvement programs of 115 companies. The objective was to establish the ‘business case’ for these activities. We sought to explore one aspect of the social role of business: non market interactions with the community.

Essentially, the study found that many companies – more than we anticipated – believe they should go beyond their traditional functions and be more involved with the community as part of an expanding social role that is connected with the health and growth of their businesses. About three quarters of the companies in the study had this view (although it is possible that this is an overestimate and the proportion is closer to 6o per cent).

At the other end of the spectrum, about 10-20 per cent of companies had the more traditional view that return to shareholders is the only way a social role could or should be fulfilled. This was a lower proportion than was expected. These companies may well conduct a philanthropic or sponsorship program but these are essentially seen as discretionary and a cost to business.

Interestingly, about 10-20 per cent of companies believe they do have a significant obligation to ‘put back in to the community’ through additional activities but do not expect a business benefit or commercial return. The return they gain from their contribution is more like that of a philanthropist whose ‘personal dividend’ or reward is knowing that community needs are being met through their efforts.

What is business doing?

'Sustainability' is the main business benefit

On the whole, companies who value corporate community involvement for the business benefits see it more in the light of aiding longer-term business sustainability than as a factor in boosting short-term competitiveness. The benefits are therefore more indirect and intangible than immediate and financial. The business case for valuing community interaction therefore seems to depend on companies having a grasp on the value of intangible assets and a vision of their longer-term goals. The corollary of this is that companies operating only with a short term business horizon will not see the returns that this area can bring.

Sectors’ motives vary

Resource companies emphasise securing from community and government the ‘licence to operate’. The retail and the service sectors, on the other hand, see ‘customer good will’ and ‘market access’ as more compelling benefits. The service sector saw ‘employee benefits’ as important A medium-size manufacturing company though, located in an industrial zone, may not perceive any of these benefits nor feel any additional pressure to engage with the community.

Poor data on the level of contribution