Source: Rethinking Business Regulation, From Self-Regulation to Social Control
By Utting, Peter
Reflection: (My apologies for a rambling, disorganized post. In the midst of dealing with a difficult resource, my hard drive crashed, so getting back on track was a process, and I didn’t edit this one very well)
Again, this was a difficult resource for me. I have a rudimentary and incomplete understanding of corporate regulation and accountability, so considerable backtracking would need to occur in order for me to fully understand what overhauling or changing that regulation involves. I feel like I hardly have enough time for forward tracking, let alone backtracking, so I’m left with more questions than answers.
Through discussion with Smart People, several aspects of material in prior resources was reexamined, giving me a better understanding of what this resource is about. Most importantly was a key characteristic of the codes, standards, and frameworks discussed in my post of that title. All (or at least most) are voluntary, and were developed by corporations themselves. Self-awareness by/of corporations is important, but this creates a distinct conflict of interest for them. When the Founding Fathers drafted the Constitution, they recognized the difficulty in objectively regulating oneself and wrote a system of governance that featured checks and balances to keep the different branches of government honest and to prevent any one of them from acquiring too much power. It is the inability of corporations to objectively self-regulate in the best interests of everybody that creates problems. To whom are corporations responsible and accountable? If they answer only to shareholders, their priority will be maximizing profit. It seems this is the way things have been historically. An effect of this is making pollution control, emission control, efficient use of raw materials, etc. a lower priority. If it becomes more profitable to flush your garbage rather than recycling or repurposing it, we end up with sick ecosystems, the effects of which we’re now recognizing.
If, on the other hand, a corporation tries to balance profit with environmental stewardship and socially just business practices, it will not be as profitable in the short term. In Business-As-Usual, where emphasis is placed on the numbers for next quarter rather than next century, this puts that corporation at a disadvantage, making it vulnerable. It’s easy to see why, in our myopic society, the sustainable corporation is a new concept. In fact, this tension between profitability and corporate social responsibility is mentioned in Rethinking Business Regulation.
The next issue I see, related to the first, is the motivation for a corporation to voluntarily comply. In Rethinking Business Regulation, the author identifies several stages of self-regulation. It seems the corporations with which I’m familiar are in the “defensive” or “compliant” stages, in which they either deny they are part of the problem or adopt a policy but treat compliance as added cost. At that stage, there is little motivation to comply. In fact, compliance could be seen as a competitive disadvantage, and the corporation may be criticized by shareholders. As I see it, this is the role of marketing. I’ve seen examples of sustainable business practices being profitable, and those profitable companies have remained so without using their sustainable practices as a marketing tool, possibly because we’re not accustomed to sustainability (as I use the term in this blog) being a competitive advantage.
This is stupid, but in the interest of time, I’m going to wait to expand on that. What it does present is the opportunity to discuss how hardening regulation could help the corporation. Let’s start with an experiment you’ve already conducted. Walk down the cereal isle in your local grocery store. What proportion of the boxes make some statement using the label “natural”? Now, compare the ingredients of those to each other and to the cereals that are “unnatural”. Differences? It’s been a while since I’ve done this, but if memory serves, you will find unpronounceable ingredients on the boxes labeled “natural”. How can this be? The term “natural” is not regulated. There are no standards that must be met in order to put it on your packaging. As such, it is meaningless. After all, there’s no shortage of naturally occurring yet really nasty compounds.
“Organic” on the other hand is regulated, and the government has set standards that must be met in order for a product to be labeled as such. No matter the product, from soda pop to rolled oats, if it says organic, the ingredients will not have used synthetic fertilizers or pesticides. This is a good thing for consumer and grower alike, as it gives us information about our purchases and a powerful marketing tool for the grower.
This is why corporation could/will benefit from hardening this regulation. It will give them meaningful information that can be used to market their products.
The final thing I’d like to mention are the thoughts that run through my head when pondering business regulation. As I’ve mentioned in the past, my parents are republican in the traditional, small government interpretation of the word. Mom counts Ayn Rand as a formative influence and has voted Libertarian many times. Dad is a small business owner. They’ve had an undeniable influence on my political beliefs. When I read about regulation, it is them I hear, whispering about the inefficiencies of bureaucracies and the pitfalls of unintended consequences, and who can argue they’re wrong? There is a fear that regulation is a trammel, and if our business and industry are trammeled and others’ are not, we will be out-competed, and we will fail. Again, this is a logical, if not appropriate, concern, but it does not take into account the ability of our businesses, industries, and economy to adapt. Agriculture in the U.S. used to be based in large part on slave labor. That system was shown to be unsustainable and the government regulated it. Industry here and abroad used to depend on child labor. That system also was shown to be unsustainable, and it was regulated. Industry adapted. These are examples which the wisdom of time has made obviously unsustainable, but the Civil War shows it was not always so obvious, and a great many people couldn’t conceive of an economy without it. The transition to sustainable business will not be easy, smooth, or straightforward. There will be many setbacks and ample opportunity to question our motivation and efficacy, but I absolutely believe there will come a time when we look back on many of our current business practices with the same disbelief with which we view slavery and child labor.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment