This Is Far From The First Time That America Has Demanded More From Its Businesses

In accordance with the ideas of the “Gospel of Wealth,” manufacturing magnates of the Gilded Age engaged in philanthropy that led to the construction of sites like Rockefeller Center” Source for Photo: Rockefeller Center

In June of 2020, JPMorgan Chase CEO Jamie Dimon visited the Chase branch in Mt. Kisco, New York. While he was there, he made a gesture emblematic of the racial reckoning the country was undergoing at the time: Dimon dropped to his knee. The move was purposefully reminiscent of that of Colin Kaepernick, a former NFL player who famously kneeled during the National Anthem in order to protest the state of racial equity in the United States. The gesture received mixed attention. Some viewed it as a sign of support for minority communities while others perceived it to be yet another example of performative allyship from a large corporation in the wake of George Floyd’s death.

No matter how one views it, the fact is that Americans are demanding more from companies. The idea that businesses have a duty to serve the public beyond simply providing goods and services is commonly known as Corporate Social Responsibility (CSR). Ideas about what exactly American corporations are responsible for has evolved over time, beginning with the “Titans of Industry” of the Gilded Age.

In the late 1800s, men like Andrew Carnegie and John D. Rockefeller donated huge sums of money from their personal fortunes to social causes. The value system that inspired this philanthropy was summarized in Carnegie’s famous article in the North American Review, “The Gospel of Wealth”. In that piece, Carnegie argued that the wealthy have an obligation to donate a portion of their fortunes to the lower classes in order to “bind together the rich and poor in harmonious relationship.” This rudimentary form of what can be considered the ideological seed of corporate social responsibility was a reflection of laissez faire economic ideals of the time. Wealthy entrepreneurs had no obligation to engage in socially minded value creation, and those that chose to follow the Gospel of Wealth focused almost entirely on large, individual donations.

In 1953, economist Howard Bowen coined the term corporate social responsibility in his book Social Responsibilities of the Businessman. The volume recognizes that “The individual businessman often fails to apprehend the connection between his private decisions and the public welfare.” Bowen argued that the power wielded by large firms could not be ignored. He believed that businesses have an obligation to consider the public repercussions of their actions beyond how they affect stockholders, a responsibility levied upon them by their “strategic position” in society. He noted that the laissez faire approach to economics yielded a strong marketplace early in American history. However, a lack of government regulation on corporations meant that society relied on individual firms to follow ethical principles in conducting business without any guarantee of execution. This, he argued, led to the creation of an economic equilibrium, but not a socially optimal equilibrium. For this forward thinking, Bowen is often referred to as “the Father of Corporate Social Responsibility”.

Marking the next major evolution in CSR development was a 1971 policy brief from the Committee for Economic Development (CED) called “Social Responsibilities of Business Corporations.” The revolutionary aspect of this brief was the Committee’s formal acknowledgement of a “social contract” between private firms and the American public. Importantly however, the CED believed that the private sector must be guided, and in some ways forced to act with the public good in mind by the federal government.

In response to growing public opinion that businesses were not doing enough for society, the CED wrote that “Business enterprises, in effect, are being asked to contribute more to the quality of American life than just supplying quantities of goods and services.” This is the basic idea of corporate social responsibility. The brief goes on to describe how the public demanded that the private sector step up to aid in solving society’s thorniest issues of the day, “The cooperative participation of the private sector is required not only for national defense and space exploration but also for advances in health care, improvement of education, and elimination of poverty.” The CED, whose board currently consists largely of corporate executives, believed that the government must shepherd the private sector in solving societal issues. They believed this was due to the fact that “Social consciousness and good citizenship, while important prerequisites, cannot realistically be expected by themselves to bring business resources to bear on the country’s social problems on the massive scale that is needed.”

Nearly forty years later in 2011, corporate social responsibility received its newest iteration. In their paper “Creating Shared Value”, Harvard Business School professors Michael Porter and Mark Kramer argued that businesses need to move beyond CSR. A far cry from the CED’s policy brief four decades before, the professors stated that companies, not the federal government, must take the lead in “bringing businesses and society back together.” They take Corporate Social Responsibility a step further by advising companies to view social issues as business opportunities, the tackling of which will lead to the simultaneous creation of financial and social value. This is the core idea of Creating Shared Value (CSV). 

Professor Daniel Gitterman, the Duncan MacRae ‘09 and Rebecca Kyle MacRae Professor and Chair of Public Policy at UNC-Chapel Hill, described the difference between Corporate Social Responsibility and Creating Shared Value by saying, “The old corporate social responsibility probably looked like the company having a foundation and giving to charity. [Creating Shared Value] is when it starts becoming more central to the [company’s] mission. The argument is that it must produce financial success and yield social benefits.”

A prime example of CSV in action took place in 2009. Yara, a fertilizer company, ran into challenges while trying to sell products to African farmers. Executives noticed that due to inadequate infrastructure and a lack of education amongst farmers, their profits were sagging in the region around Tanzania. The firm worked to create a cross-sector organization known as the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) in order to face these issues. In the years that followed, SAGCOT invested in infrastructure and agricultural education, boosting the productivity of farmers. After bettering the lives of those in their business community, Yara’s profits in the region increased by 50%. Other companies like Walmart and Goldman Sachs have since created similar cross-sector organizations within the U.S.

Professor Gitterman has spent a great deal of time researching cross-sector collaboration. He views “cross-sector collaboration as one of the branches of the corporate social responsibility tree.” In his book, The Intersector, UVA Darden School of Business Professor Mary Margaret Frank and Kathryn Babineau argue that solving complex social issues requires collaboration between the public, private, and nonprofit sectors. Specifically, they argue that public-private partnerships must evolve beyond the “design and build” model, a shallow partnership where the goals of the sectors often don’t align, and the risk is often placed entirely upon the public sector. Cross-sector projects designed in alignment with these ideas have done everything from reducing the amount of counterfeit medications in Nigeria to converting a former nuclear site in Colorado into a National Wildlife Refuge.

This brings us to 2020. In her article, “We’re Entering the Age of Corporate Social Justice,” Lily Zheng outlines what she calls the “new paradigm” for CSR: Corporate Social Justice (CSJ). Zheng created the CSJ framework after noticing that “the widespread reactions to the standard CSR playbook suggest that old best practices may no longer work.” CSJ is novel in that it encourages companies to actively engage in ongoing social projects, analyze outcomes for disadvantaged groups, and retool strategies. Corporate Social Justice is also different from CSR in that there must exist a much more profound sense of trust between a firm and the broader community, which leads to more accountability. Compared to every framework discussed thus far, CSJ encourages companies to place social value creation the closest to their core mission. In this way, Corporate Social Justice strategies respond to the growing number of people who “want companies that see social good as a necessity, not just a marketing strategy.”

Americans have always demanded that businesses yield benefits for society. As society has progressed, so has its expectation for what those benefits should entail. Carnegie and other manufacturing magnates of the Gilded Age believed that their philanthropy made them responsible businessmen, even while running factories that employed children under 12 where workers were largely treated as expendable. Now, firms are expected to integrate social good into almost all of their actions. 

Given the immense power wielded by companies in today’s world, it is indeed likely that it is a necessity that the private sector become a partner in solving today’s problems. This fact, similar to the public demand for the private sector to do more, is not new. Howard Bowen’s words from 1953 still ring true, “The decisions and actions of the businessman have a direct bearing on the quality of our lives and personalities. His decisions affect not only himself, his stockholders, his immediate workers, or his customers- they affect the lives and fortunes of us all.”