Copyright (C) 2004 by Jeffrey Hollender and Stephen Fenichell

In What Matters Most, Stephen Fenichell and I explore the forces behind this new paradigm and the social implications it offers. There are still some who consider the phrase "socially responsible business" a contradiction in terms, and who feel that the notion of CSR (Corporate Social Responsibility) is a trendy hollow hoax, intrinsically suspect. Others believe that this emerging doctrine of deeper and broader accountability for business is fundamentally pernicious, because it distracts profit-making organizations from what they do best: making money for their shareholders.

One of the latter critics, Michael Prowse, recently argued in the pages of the Financial Times:

The role of the corporation should be to provide individuals with the means to be socially responsible. Rather than trying to play the role of social worker, senior executives should concentrate on their statutory obligations. We should not expect benevolence of them, but we should demand probity: the socially responsible chief executive is the one who turns a profit without lying, cheating, robbing or defrauding anyone.

This formulation is not only inadequate but fundamentally misguided, and we will put forth the case for precisely the opposite of that argument: The adoption and infusion, throughout every phase and element of a business, of a vision and mission that embrace the values of social responsibility in all of its forms will increasingly become a necessity for organizations of every size. The corollary to this thesis is that managing the often daunting task of introducing this critical component into the day-to-day conduct of business activity, and of maintaining top management's attention and commitment to it, can be-and has been-as effective a means of re-engineering an organization and of creating opportunities for long-term stable growth and improved financial performance. Most, if not all, of the trendier change agents-downsizing, hierarchy-flattening, entrepreneuring, to name just a few of those employed over the past decades-have proved to be futile and often fleeting attempts to fundamentally improve the concept, content, and character of corporations. Responsible business is different from all other trends because at the most fundamental level it is responsive to significant changes in the macro-economic environment, otherwise known as the planet and all those who inhabit it. It is not driven by a desire to develop a new way to beat the competition, or to maximize profits, but by a compassionate and value-based response to the challenges facing our society and the new role that business is expected by that society to play in the world.

We will talk about the voguish term synergy. But the synergy to which we refer is not the sort so frequently invoked over the past decades to justify large-scale mega-mergers, which have for the most part failed to live up to their great expectations and have created short-term value largely limited to brokers and other intermediaries, a few senior managers, and other interested parties. The synergy we advocate integrates values and belief systems across a wide range of business units, partners, employees, and customers, and brings such disparate groups as investors and customers into a unique form of synchronization, a corporate community of stakeholders united by a common vision, which creates truly long-term value not just for shareholders but for all.

We will talk about transparency and disclosure, one of the foundational elements of this entire concept. Transparency not just in the sense of providing complete, accurate, and reliable financial information, but of a full disclose of every aspect of a corporation's impact on and relationships with all of its stakeholders, as opposed to its shareholders. This ranges from how it treats its employees and the workers at all the factories that manufacture the products it sells, to the environmental footprint of its operations, and the way it influences and interacts with NGOs (nongovernmental organizations) and local politicians in all the communities in which it operates.

We will also talk about scale, but from a different perspective than the one associated with the pet phrase economies of scale. Our sense of scale is more one of appropriate scale than of size at all cost. Scale is a two-way street: Size does matter, but not the way most people think. To refer to the once fashionable (perhaps soon to be revived) work of British economist E. F. Schumacher, small can be both beautiful and profitable.

We will be talking about ownership structure and the often overlooked and misunderstood differences between private and public equity. Venture capitalists and private equity investors play an important role in the constant jockeying of long-term versus short-term gains and expectations. Ownership structures do matter, and they must be understood in terms of their impact on management decisions.

We will be looking at the emerging ethic of social responsibility from the point of view of some of its early visionaries. We will take an intimate look at Ben & Jerry's, Patagonia, the Body Shop, Stonyfield Farm, Working Assets, Interface Carpet, and our very own Seventh Generation. We will ask these companies some difficult questions: How has Ben & Jerry's core mission survived as a subsidiary of Unilever? Are the mission and values of Stonyfield Farm, now a division of international food giant Danone, so deeply and indelibly "encoded into the brand," as its founder Gary Hirshberg maintains, that becoming part of a great global conglomerate really is an unmixed blessing? Is it the place of business to adopt controversial political and social positions, and if so, to what benefit to the business and at what cost?

From Intel and Hewlett-Packard to Chiquita and Nike, we will be looking at the transformations being executed by some of the world's largest corporations, and the difficulties they have faced as they rise to the challenge of embracing this new paradigm. In all of these explorations, our intention will be to uncover and carefully anatomize the pervasive compromises and complexities, as opposed to the simple and easy solutions, that being a good citizen on the corporate level inevitably requires in the twenty-first century.

Reprinted by arrangement with Basic Books, A Member of the Perseus Books Group.