Unit 13

Social Function of Business

Social responsibility means that businesses, in
addition to maximizing shareholder value, must
act in a manner benefiting society, not just the
bottom line. Social responsibility has become
increasingly important to investors and
consumers who seek investments that not only
are profitable but also contribute to the welfare
of society and the environment. While critics
have traditionally argued that the basic nature
of business does not consider society as
a stakeholder, younger generations are
embracing social responsibility and driving
change
What Are the 4 Types of Social Responsibility?
The International Organization for Standardization (ISO) emphasizes that a
business’s ability to maintain a balance between pursuing economic performance
and adhering to societal and environmental issues is a critical factor in operating
efficiently and effectively.
The key ways that a company embraces social responsibility include philanthropy,
promoting volunteering, ethical labor practices, and environmental changes.
For example, companies managing their environmental impact might look to reduce
their carbon footprint and limit waste. There’s also the social responsibility of
ethical practices for employees, which can mean offering a fair wage, which arises
when there are limited employee protection laws.
Examples of Socially Responsible Corporations
Social responsibility takes on different meanings within industries and companies.
For example:

Starbucks Corp. (SBUX) committed to social responsibility from the start, including
sustainability and community welfare. It purchases Fair Trade Certified ingredients
to manufacture products and actively supports sustainable farming in the regions
where ingredients are sourced.

Ben & Jerry’s Homemade Holdings Inc. has integrated social responsibility into the
core of its operations. Like Starbucks, the company purchases Fair Trade Certified
ingredients.

The Lego Group, manufacturer of Lego toys, has committed to reducing its carbon
impact. It was named a World Wildlife Fund Climate Savers Partner in 2014.

Salesforce.com Inc. (CRM) developed what it calls the 1-1-1 model. The company
dedicates 1% of its equity, 1% of its product, and 1% of employees’ time back to
the community.

Big-box retailer Target Corp. (TGT), also well known for its social responsibility
programs, has donated money to communities in which the stores operate,
including education grants.
Criticism of Corporate Social Responsibility
Not everyone believes that businesses should have a social
conscience. Economist Milton Friedman stated that “‘social
responsibilities of business’ are notable for their analytical
looseness and lack of rigor.” Friedman believed that only
individuals can have a sense of social responsibility. Businesses,
by their very nature, cannot. Some experts believe that social
responsibility defies the very point of being in business: profit
above all else.
However, social responsibility has become more mainstream
and is now practiced among a wide range of companies.
Younger generations, such as millennials and Gen Z, are
embracing social responsibility and driving change in the
workplace and as consumers.
Triple Bottom Line Approach

https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line
 Johnson & Johnson

An excellent example of CSR on the frontline is big pharma pioneer Johnson & Johnson.
They have focused on reducing their impact on the planet for three decades. Their
initiatives range from leveraging the power of the wind to providing safe water to
communities around the world. Their purchase of a privately-owned energy supplier in
the Texas Panhandle allowed the company to reduce pollution while providing a
renewable, economical alternative to electricity. The company continues to seek out
renewable energy options with the goal of having 100% of its energy needs from
renewable sources by 2025.
2. Social issues: Google
Google is trusted not only for its environmentally friendly initiatives but also due to its outspoken CEO, Sundar
Pichai. He stands up against social issues including President Donald Trump’s anti-Muslim comments. Google also
earned the Reputation Institute’s highest CSR 2018 score much in part due to their data centers using 50% less
energy than others in the world. They also have committed over $1 billion to renewable energy projects and
enable other businesses to reduce their environmental impact through services such as Gmail.
3. Coca-Cola
As a brand, Coca-Cola is putting a huge focus on sustainability. The key areas are climate, packaging and agriculture
along with water stewardship and product quality. Their message is ‘a world without waste’, with the aim of collecting
and recycling every bottle, making their packaging 100% recyclable and replacing all water used in creating their drinks
back to the environment to ensure water security. They aim that by 2030, they will have reduced their carbon footprint
by 25%.
In 2021, Coca-Cola unveiled its first-ever beverage bottle made from 100% plant-based plastic. “Our goal is to develop
sustainable solutions for the entire industry, We want other companies to join us and move forward, collectively. We
don’t see renewable or recycled content as areas where we want competitive advantage,” said Dana Breed, Global R&D
Director, Packaging and Sustainability, The Coca-Cola Company.
4. Carbon neutral & pay equity: Ford Motor Company
Ford has huge plans in the area of CSR. Their mission is to ‘build
a better world, where everyone is free to move and pursue their
dreams’. They have increased investment in electrification to
$22Bn (from an original $11Bn) and aim for their vehicles to be
carbon neutral by 2050.
“We’re committed to carbon neutrality”, stated Bob Holycross,
Ford’s VP, Chief Sustainability, Environment & Safety Officer. “It’s
the right thing for our customers, the planet and Ford. Ninety-
five percent of our carbon emissions today come from our
vehicles, operations and suppliers, and we’re tackling all three
areas with urgency and optimism,”
Interestingly, the company is also focusing on pay equity. They
are conducting a diversity, equity and inclusion audit while
introducing a global salaried pay ratio (including gender) to level
the playing field for all employees.
5 & 6. Employee rights: Netflix & Spotify
From a social perspective, companies such as Netflix and Spotify
offer benefits to support their employees and families.
Netflix offers 52 weeks of paid parental leave to the birth parent
and non-birth parent (which includes adopted children). This
can be taken at any time whether it is the first year of the child's
life or another time that suits their needs. This compares to a
median of 18 weeks at other major tech companies.
Spotify offers a similar program, although for a shorter duration
of 24 weeks of paid leave. The company believes the launch of
this initiative resulted in a spike in external job
applications which has never abated.
When it comes to social causes, Netflix and Spotify use their
social media platforms to show support for movements such as
Pride month, environmental sustainability, and Black Lives
Matter. Netflix sets an example on how to target -and appeal to
- niche and minority audiences through clever social media.
7. Pfizer
When disaster strikes, emergency assistance in healthcare is
crucial. To aid in these circumstances, Pfizer has a three-
pronged approach; product donations, grants and solutions to
access.
Grants have been provided to countries such as Haiti in the
aftermath of Hurricane Matthew and the global refugee crisis in
Europe and the Middle East. This money is provided in
cooperation with NGOs to reach as many people as possible.
During the COVID-19 pandemic, through its Global Medical
Grants program, Pfizer provided $5 million to help improve the
recognition, diagnosis, treatment and management of patients.
In addition, grants were made available to clinics, medical
centers and hospitals to improve the management and outcome
of COVID-19 patients.
In 2022, Pfizer was named one of the most ethical companies in
the world by Ethisphere.
8. Philanthropic Donations: Wells Fargo
Wells Fargo donates up to 1.5% of its revenue to charitable
causes each year to more than 14,500 nonprofits through
philanthropy such as food banks and incubators (plant science
and renewable energy) to hasten the speed to market for start-
ups.
In response to the COVID-19 pandemic, the company
donated $6.25 million to support a domestic and global
response. This includes $1 million for the CDC Foundation,
$250,000 to the International Medical Corps across 30
countries, and $5 million for efforts at a local level to address
community needs.
9. TOMS
TOMS's mission is to donate a pair of shoes for every pair they sell and this has resulted in the donation of over 100 million
pairs of shoes to children in need. These profits have been used to assist the visually impaired by providing prescription
glasses and medical treatments, providing 'safe' drinking water and building businesses in developing countries to create
jobs.
Since the company came under criticism from NGOs for creating a dependency on free shoes and collapsing local shoe-
making industries, TOMS has re-evaluated its strategy. Instead of focusing on free shoes, the company now donates one-
third of its profits to grassroots campaigns. This includes the COVID-19 Giving Fund and racial justice campaigns such as
Black Lives Matter.
“We learned that giving shoes, sight, and safe water for over a decade was an amazing start— the right start — to creating
meaningful change. But, the decision to give impact grants instead will enable our community to do even more. Rather than
giving shoes, we’re giving 1⁄3 of our profits. In other words, $1 for every $3 we make, which is about as much as a company
can give while still keeping the lights on.” - TOMS Impact Report 2019-2020.
10. Climate neutral: Bosch
Bosch set itself ambitious goals for protecting the environment,
with an aim to reduce their ecological footprint through climate
action, water usage, and a circular economy.
It seems this ambition has paid off and paved the way for other
global companies, as 400 of its locations are now climate
neutral. The company now wants to reduce upstream
(purchased goods and services) and downstream (product use)
emissions by 15% in 2030.
“Having achieved our initial targets for scopes 1 and 2, we are
now tackling scope 3 emissions with the same degree of rigor –
setting specific targets and milestones for the coming years.” -
Torsten Kallweit, Head of EHS AND Sustainability
11. Clean technology: GE
It's been over a decade since General Electric launched
Ecomagination, its renewable business strategy with a mission
to double down on clean technology and generate $20 billion in
revenue from green products.
As part of its ‘Ecomagination Challenge’ launched last year, GE
awarded five people $100,000 each to develop their innovations
such as an inflatable wind turbine, an intelligent water meter, a
cyber secure network infrastructure, and short-circuiting and
outage technology.
12. Starbucks
With an eye to hiring, Starbucks wanted to diversify its
workforce and provide opportunities for specific cohorts. It has
pledged to hire 25,000 US military veterans and spouses by
2025 as part of its socially responsible efforts. Ahead of
schedule, the company reached this milestone six years early
and now hires 5,000 veterans and military spouses every year.
To tackle racial and social equity, Starbucks announced
a mentorship program to connect black, indigenous, and people
of color (BIPOC) to senior leaders and invest in partnerships. The
chain also aims to have BIPOC represented at 30% in corporate
roles and 40% in retail and manufacturing by 2025.
13. Sustainability: New Belgium Brewing Company
This brewing company owned entirely by its employees through
a stock ownership plan is focused on sustainability. Its Fort
Collins, Colorado brewery produces its electricity through solar
panels and wastewater and aims to have all its beer carbon
neutral by 2030. It also gives away $1 of every barrel sold to
support their philanthropic initiatives, values and goals.
According to the Director of CSR, Katie Wallace: “We consider
social and environmental well-being to be intricately
intertwined.”
14. Local communities: The Walt Disney Company
Disney committed to reducing its carbon footprint in its 2020
CSR report with goals for zero net greenhouse gas emissions,
zero waste, and a commitment to conserve water. They are
actively ensuring strict international labor policies to protect the
safety and rights of their employees.
They are also active in the community and encourage
employees to do the same. When their parks closed due to the
COVID-19 pandemic, Disney focused their CSR efforts on local
communities. They provided $27 million towards food
donations and PPE from closed parks and production sets and
encouraged employees to participate in virtual volunteering.
15. Packaging: LEGO
Lego will invest $400 million over the next three years with a
focus on accelerating its efforts in the area of sustainability.
Their primary focus as a modern-day superbrand is to phase out
single-use plastic packaging for its bricks with all packaging to be
sustainable by 2025. From 2021 on they will trial paper bags in
boxes in partnership with the Forest Stewardship Council. They
are also investing in more sustainable products that create zero
waste and are carbon neutral.
LEGO Group CEO, Niels B Christiansen said: “We cannot lose
sight of the fundamental challenges facing future generations.
It’s critical we take urgent action now to care for the planet and
future generations. As a company that looks to children as our
role models, we are inspired by the millions of kids who have
called for more urgent action on climate change.”
16. Social media & journalism: The Washington Post
In the wake of fake news, news outlets are taking to social
media networks like TikTok to address a new audience and
tackle false information around issues such as the U.S election
and coronavirus.
The Washington Post is one example of a news brand using
TikTok successfully. Their tagline is ‘We are a Newspaper’ and
their TikTok profile already has 1 million followers (and
growing). Their goal? To draw in new readers and build trust
using short-form videos and viral content.
According to Dave Jorgensen, the Post’s social media guru,
the rapid rise of TikTok is down to the fact that the platform has
increased the trust between the paper and its followers. He
believes that TikTok is journalism in every sense. “Pretty much
every other TikTok has something news related in it and with
that we are delivering news to the users. That’s what journalism
is – delivering news however you are able to in a responsible
way.”