BUSS164 Business for Society

경영과 사회
Social Value and Business
사회적가치와 경영

March 2023
문정빈 (Jon J. Moon)
Korea University Business School

1 BUSS164 KUBS
 Class Outline
▪ Welcome to KUBS!
▪ Issues facing human civilization
▪ The relationship between business and society
▪ Why is social value important in business?
▪ Ways to create social value
▪ Examples

2 BUSS164 KUBS
What Are the Five Most Important Aspects of Your Life?

▪ On a piece of paper (or on your tablet)

▪ Write down five most important aspects of
your life.
▪ Assign weights to each aspect, with weights
adding up to 100
▪ Score each aspect
▪ What is your life score? Which grade would
you give to yourself ?

3 BUSS164 KUBS
From the Beginning of Modern Business Education…

▪ Business education should find “solutions to the social

problems inherent in our civilization.”
▪ “Business leaders should be community builders and
leaders who are responsible to society’s shared needs.”
--Joseph Wharton

4 BUSS164 KUBS
 What Is ESG?
▪ ESG stands for Environmental, Social, and Governance. It is a term used to describe the three dimensions of sustainability that
are used to evaluate the sustainability and societal impact of an investment in a company or business. The ESG criteria are often
used by investors as a way to assess the long-term sustainability and ethical impact of an investment.
▪ ESG란 환경, 사회, 지배구조를 뜻합니다. 투자의 지속가능성과 사회적 영향을 평가하는 데 사용되는 세
가지 차원을 기술하는 용어입니다. ESG 기준은 투자자들이 투자의 장기적 지속가능성과 윤리적 영향을
측정하는 방식으로 자주 사용됩니다.

▪ Environmental criteria consider the company’s impact on the environment and its efforts to reduce its carbon footprint. Social
criteria focus on the company's treatment of its employees, customers, and other stakeholders, as well as its impact on the
community and society as a whole. Governance criteria evaluate the company's leadership and management, including its board
of directors, executive compensation, and risk management practices.
▪ 환경 기준은 기업의 환경적 영향과 탄소배출을 줄이려는 노력을 고려합니다. 사회 기준은 직원, 고객 등
이해관계자에 대한 대우와 지역사회, 사회 전체 등에 대한 영향에 주목합니다. 지배구조 기준은 이사회,
임원 보수, 위험 관리 관행 등 기업의 최고경영진과 관련된 항목들을 평가합니다.

▪ Investors may consider ESG criteria when making investment decisions because they believe that companies that score well on
ESG metrics are more likely to be financially successful in the long term. This is because ESG factors can affect a company's
reputation, financial performance, and risk profile.
▪ ESG 요인들이 기업의 평판, 재무 성과, 위험 프로필에 영향을 미치기 때문에, ESG 평가가 우수한 기업이
장기적으로 재무적으로 성공할 것으로 믿는 투자자들은 ESG 요인들을 투자 결정에 고려할 수 있습니다.

5 BUSS164 KUBS
 Global Income Distribution (2022)

6 BUSS164 KUBS Source: Gapminder.org

7 BUSS164 KUBS
Source: Harvard University Press Blog (6/30/2016); https://harvardpress.typepad.com/hup_publicity/2016/06/branko-milanovic-elephant-chart-brexit.html
Source: Dylan Matthews, Vox 2/2/2018; https://www.vox.com/policy-
and-politics/2018/2/2/16868838/elephant-graph-chart-global-
inequality-economic-growth
8 BUSS164 KUBS
 Anthropocene (인류세)

9 BUSS164 KUBS
 We Are Living in a New
Geological Period!
▪ There is a proposal among geologists that the earth has
entered a new geological period (“epoch”) of Anthropocene.
▪ Roughly 300 million metric tons of plastic produced annually
will leave identifiable fossil records.
▪ Radioactive isotopes from nuclear weapons testing from 1950s
and 60s
▪ Increased CO2 concentrations in the atmosphere by 120 ppm,
to over 400 ppm.
▪ The current rate of extinction of species is far above historical
long-term averages.
▪ Left a permanent marker in sediment and glacial ice with
airborne black carbon particles from burning fossil-fuel
▪ Doubled the nitrogen in our soils in the past century (largest
impact on the nitrogen cycle in 2.5 billion years).

10 BUSS164 KUBS
 Changes in Average Surface Temperature on Earth
Source: IPCC 6th Annual Report (2021)

11 BUSS164 KUBS
 Consequences of Global Climate Change: By Scenarios
Source: IPCC 6th Annual Report (2021)

12 BUSS164 KUBS
 Average Temperature Projection for High Emission
Scenario

Source: Hsiang & Kopp, JEP 2018

13 BUSS164 KUBS
 Historical Top 15 Carbon Emitting Countries from Fossil Fuel
Combustion and Cement Production

14 BUSS164 KUBS
 UN Sustainable Development Goals

15 BUSS164 KUBS
 Milton Friedman (1962)
Capitalism and Freedom

▪ “The social responsibility of business is to

increase its profits.”
▪ 기업이 갖는 사회적 책임은 오직 하나, 즉
규칙을 지키는 한에서, 다시 말해 속임수나
사기 없이 자유로운 경쟁을 벌이는 한에서,
이윤을 증가시키도록 자원과 활동을
조직하는 것 뿐이다.

16 BUSS164 KUBS
 Johnson & Johnson’s “Credo”
▪ “We believe our first responsibility is to the doctors, nurses and patients,
to mothers and fathers and all others who use our products and
services.…We are responsible to our employees, the men and women
who work with us throughout the world.…We are responsible to the
communities in which we live and work and to the world community as
well.…Our final responsibility is to our stockholders.… When we
operate according to these principles, the stockholders should realize a
fair return.”

▪ “우리의 가장 첫 번째 책임은 의사, 간호사, 환자, 어머니, 아버지

그리고 우리의 제품과 서비스를 이용하는 모든 고객에 대한
것이다.…우리는 전세계의 우리를 위해 일하는 모든 조직구성원에
대해서도 책임이 있다.…우리는 우리가 일하고 살고 있는 공동체와
세계 공동체에 대해서도 책임이 있다.…우리의 마지막 책임은 주주에
대한 것이다.… 우리가 이 원칙에 따른다면 주주들은 공정한 수익을
얻을 수 있을 것이다.”

17 BUSS164 KUBS
 Business Roundtable
▪ In August 2019, Business Roundtable, an association of CEO’s of
America’s leading companies, published a statement on the purpose of
a corporation. It clearly states their commitment to:
▪ Delivering value to our customers.
▪ Investing in our employees.
▪ Dealing fairly and ethically with our suppliers.
▪ Supporting the communities in which we work.
▪ Generating long-term value for shareholders.
▪ While reaffirming that the free-market system is the best means of
generating good jobs, a strong and sustainable economy, innovation, a
healthy environment and economic opportunity for all.

18 BUSS164 KUBS
 Broad Socio-political Environment of Business

Source: Bach & Allen, Sloan Management Review 2010

19 BUSS164 KUBS
 Stakeholders
▪ Any group that has a vested interest in the
operations of the firm, including:
▪ Shareholders
▪ Employees
▪ Customers
▪ Suppliers
▪ Creditors
▪ Government
▪ Local community
▪ Society as a whole
▪ Natural environment
20 BUSS164 KUBS
Strategy & Society (Porter & Kramer, HBR 2006)
▪ What does moneymaking entail?
▪ Real value creation
▪ Appropriation of value created by others
▪ The relationship between business and society should
move toward finding shared value between business and
society.
▪ “Successful corporations need a healthy society. At the
same time, a healthy society needs successful companies.”
▪ Education, health care, fairness, environmental sustainability are
essential to a productive workforce.
▪ Business sector is most effective in creating jobs, wealth, and
innovation.

21 BUSS164 KUBS
 Alex Edmans (2020) Grow the Pie:
1) Pie-splitting Mentality

22 BUSS164 KUBS
 Alex Edmans (2020) Grow the Pie:
2) Pie-growing Mentality

23 BUSS164 KUBS
 How Business Can Create Social Value
▪ Utilitarian perspective
▪ By providing public goods
▪ By reducing negative externalities
▪ By creating positive externalities
▪ Kantian rights perspective
▪ By promoting fundamental human rights
regarding life, liberty, and pursuit of happiness
▪ Rawlsian justice perspective
▪ By improving the lives of the socially
disadvantaged

24 BUSS164 KUBS
 Providing Public Goods, thereby Promoting
Fundamental Human Rights:
▪ WHAT3WORDS has built an address system that is efficient, user-friendly, and
accurate.
▪ It breaks the entire surface of the Earth into 3m x 3m squares (57 trillion of
them!) and labels each with three English word combinations.
▪ For example, a square near KUBS is teach.corals.miracles.
▪ Actually, there are many places on Earth that does not have a physical address.
▪ In some other places, it is very difficult to navigate using the existing address
system.
▪ GPS coordinates, on the other hand, are accurate yet impossible to memorize
or communicate with.
▪ WHAT3WORDS can make logistics more efficient in the developed countries,
and at the same time, help improve lives in less developed countries.
25 BUSS164 KUBS
Reducing Negative Externalities: Naver Data Center
“Gak”
▪ Located in Chun-cheon,
Gangwon Province, one
of the coldest places in
Korea
▪ LEED Platinum building
▪ By using green memory,
reducing energy
consumption by 73.8%
compared to conventional
data centers

26 BUSS164 KUBS
 Creating Positive
Externalities:
▪ patagonia, well-known for outdoor
apparel, started a beer brand.
▪ Is it unrelated diversification?
▪ To fight global climate change due to
increase carbon emission, the
company started to grow Kernza® , a
perennial plant.
▪ They launched Long Root Ale brand
(Oct. 2016) out of Kernza® crop.

27 BUSS164 KUBS
 Promoting Fundamental Human Rights:
CIZION LiveRe
▪ Tragedies due to hateful online replies to news articles, etc.
▪ Widespread spam replies that prevent constructive dialogue
▪ Cizion offers login service through individual SNS accounts, deterring
extreme replies
▪ It also offers spam filtering.
▪ Overall, it aspires to enhance online experience through better
communication and more active participation
▪ More online replies & reduced hateful or spam replies (97% -> 5%)
▪ Cloud filtering based on AI technology reduces costs and saves time for
the website operator.
▪ Also provides big data analysis of replies and users

28 BUSS164 KUBS
 Improving the Lives of the Disadvantaged: Enuma

▪ With its learning game software Kitkit® School, Enuma

shared $15 million grand prize at the Global Learning
XPRIZE competition in 2019.
▪ Kitkit® School is developed in order to help the children in
Africa who have difficulty learning how to read or write.
▪ Enuma is cofounded by Sooinn Lee and Gunho Lee, a
couple who used to be world-class engineer and game
designer whose inspiration came from their son born with
special needs.

29 BUSS164 KUBS
 To Wrap Up…
▪ Business education emphasizes finding solutions to the social problems inherent
in our civilization.
▪ Global climate change is a real challenge that requires the collaboration between
governments and businesses, creating solutions through regulations, innovations
and new technologies.
▪ Tensions are rising as a large population that is unhappy about growing
inequality shows anti-business, anti-globalization attitudes.
▪ Social value in business can be created by providing public goods, by reducing
negative externalities or by creating positive externalities, by promoting
fundamental human rights, and by improving the lives of the socially
disadvantaged.
▪ Recently, social value creation has become a key part of business success for
modern business organizations, and examples abound.
30 BUSS164 KUBS