NYU Stern has long
been committed to exploring the connection between business
practices and issues relating to the environment
and social welfare. In October 2003, as part of a joint venture
with Resources for the Future, a Washington-based think tank
devoted to environmental, energy, and natural resources issues,
NYU Stern convened a lively panel discussion that explored
a range of topics centering on the theme of corporate responsibility.
The panel included: Bruce Buchanan, the C.W. Nichols Professor
of Business Ethics at NYU Stern; Mindy Luber, executive
director
of the Coalition for Environmentally Responsible Economies
(CERE); Paul Portney, president of Resources for the Future;
and Dr.
Paul Tebo, vice-president of health, safety and environment
at DuPont Corp. It was moderated by Vijay Vaitheeswaran, the
global
environment and energy correspondent for The Economist.
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Vijay Vaitheeswaran: The question we're here to talk about,
corporate social responsibility, cuts to the heart of some of
the big ethical questions of our day. What are the limits of
corporate responsibility? Is a corporation a moral actor?
Mindy Luber: What encompasses corporate
responsibility? To some, it’s worker rights and worker
safety. To others, it's people in the community. To others,
it's the environment. Today, I want
to consider the issue of climate change. It is essentially a
business issue that we cannot continue to ignore. I would go
so far as to say that we are in breach of our fiduciary duty
as business leaders if we are not looking at an issue that has
multi-billion dollar implications. The key to the long-term health
and prosperity of any company and of the planet will depend on
the integration of sustainability issues into the core strategy
of a company. Climate change is a significant threat to the world's
economies. And responsible corporate behavior on climate change
builds shareholder value.
Bruce Buchanan: My mission here is to
talk about how we define corporate social responsibility in
the classroom. Adam Smith
said, “By pursuing his own self-interest, he frequently
promotes that of society more effectually than when he really
intends to promote it.” Private selfishness equals public
virtue. When it comes to social responsibility, if the market
works perfectly, there is no need for social responsibility.
We come into issues of social responsibility when we have market
imperfections, for example pollution not being properly priced.
Political rights in our country are things like the right to
a clean environment, as enforced by the EPA, or the right to
reasonably safe products as enforced by products liability law.
If someone has a right, we all must respect that right and the
political entity must enforce it. But there is a distinction
between a political right that's enforced, and a more vague human
right that is not. And it's in human rights, where the corporation
is operating without a strong context of law and government around
it, that corporate responsibility is most called for. A company
has a duty to not pollute the environment in the U.S., and if
it does pollute the environment, it will be fined. What if that
company is operating in a country without that kind of law?
Paul Tebo: At DuPont, we don't use the
words "corporate
social responsibility". We use the words "sustainable
growth." Both concepts talk about economics, environment,
and social responsibility. Many years ago, President Jimmy Carter
was interested in eliminating Guinea Worm Disease in Africa,
which at the time either severely affected or killed 3.5 million
people. The worm gets into the water system. He asked DuPont
if we would create some nylon that could be made into fabric
that you could take into the remote places in Africa and filter
the water. And today there are less than 70,000 cases of the
disease. Is that corporate social responsibility, or sustainable
growth? This gives me more of a feel of corporate social responsibility.
We made lots of money on nylon, but this was basically something
that we decided to donate.
Compare that to a product called Tyvek.
Today, we can take 25 percent of the material to make Tyvek
from waste milk jugs, water
jugs, things that are thrown away. We got 100 percent of the
U.S. Postal Service’s business at a price premium, because
they like the recycled content. Next we found you could wrap
houses in Tyvek. Turns out for every unit of energy put into
making Tyvek, the average homeowner saves 1000 units of energy
in the normal lifetime of a house. Tyvek is also used to protect
people. A lot of Tyvek garments came to Ground Zero here in New
York City. We sent Tyvek garments to China to help eliminate
SARS, so it's got a very strong social responsibility component.
At DuPont, we also have a goal of zero for injury, illnesses,
incidence, waste and emissions. Our global air carcinogens are
down 92 percent over the last decade; global air toxins are down
75 percent. In the early 90s, we set an energy goal and we ended
up keeping energy flat during the decade of the 90s, while we
grew 30 percent. That goal saved us about two billion dollars
in energy costs. Working on energy and keeping it flat while
you grow is a terrifically good strategy.
Paul Portney: If corporate social responsibility is to mean anything,
it has to mean the practice of companies going above and beyond
what they're required to do by law and regulation in areas such
as the environment, worker safety, and even on social issues.
I don't see a company as particularly responsible if what it
does is obey all of the applicable laws and regulations, anymore
than I think I deserve an award or feel that I'm a socially responsible
person if I pay my income taxes and don't drive faster than the
speed limit.
“When
it comes to social
responsibility, if the market works perfectly, there
is no need for social responsibility.” |
I am troubled by the notion of corporate social responsibility
because it carries with it the unstated implication that the
normal activities in which corporations are engaged are somehow
not useful or perhaps even not responsible. And yet, I want to
remind everybody what happens in the normal process of corporate
business. First, in the United States today, corporate employment
is somewhere in the range of 70 to 80 million people. These people
are provided viable incomes and enjoy the benefits of health
coverage as a condition of their employment. Second, through
their issuance of corporate debt, corporations provide an outlet
for savings, and thus encourage our thrift. Finally, through
the equity markets, corporations reward risk taking. These are
all very responsible activities.
I believe we hear so much about corporate
social responsibility because we in society are reluctant to
tax ourselves to support
activities that are the legitimate domain of the public sector.
All we've done is move those costs around either to the customers,
to the employees, who will earn less than they would have otherwise,
or to the shareholders – instead of to the people that
would pay the taxes if these were public sector expenditures. Vaitheeswaran: What is the difference
in cost between cutting the first 50 percent of a pollutant
and the last five percent
of a pollutant? Is zero pollutants the right target for society
or for a company?
Portney: It may make sense to reduce some things to zero, if
it's trivially inexpensive to make that final reduction. I guess
my economics training makes me suspect that in very few cases
could you justify going all the way to zero, because the more
you reduce the pollutant or the more you try to conserve the
resources that you use, the more difficult it becomes to reduce
pollution further. And the more you push these activities, the
more expensive each subsequent reduction in emissions becomes.
Tebo: Making things go to zero is very, very important. Waste
is a defect in your process, it's a basic cost problem.
Luber: I think we could come to a reasonable agreement on emissions,
for example. Zero emission vehicles are not necessarily the answer.
But smart vehicles with slightly better vehicle mileage per gallon
is what I think we need as a society. They would create less
greenhouse gases, less air pollutants. But we've got to have
an economic system where it makes sense from a business perspective,
not only from a corporate and environmental and social perspective,
to build vehicles that are more environmentally efficient. There
is no logic in the fact that we ought to be making more Hummers,
rather than making more hybrids.
Audience question: Should companies block or encourage legislation
that would benefit the society but hurt their bottom line?
Portney: We ought to be institutions that don't have an ax to
grind on either side of an issue, but try to do independent analysis
and share it with everybody, so that there is factual and high
quality analysis.
“American
consumers, in my
opinion, have shown no interest in the environment, period.
They drive huge cars with ‘Save the Polar Bear’ plates.” |
Tebo: I want to talk about leadership. We waste so much energy
in this country, it's awful. We need an energy goal. In my mind,
that goal is not go find more energy, but to use the energy we
have more effectively. By 2025, we should be completely independent
of foreign sources of energy. And by the way, I would not suggest
we go find more oil to do it.
Portney: My goal is that we price things correctly. The price
of energy should reflect the full cost of production, not just
the cost of exploring for it and getting it to the United States
and refining it, and selling it in gas stations, but also the
environmental cost, difficult though it may be to estimate, and
of import dependence from foreign countries.
Vaitheeswaran: Are you putting yourself at a competitive disadvantage
by using clean processes?
Tebo: Most of our older factories are here in the U.S. And so
as we go overseas, we can design almost at zero waste and emissions
from the beginning. Most of our better operations tend to be
outside the U.S. We built a facility outside of Shanghai and
chose to put a waste treatment plant in when it wasn't required.
The government looked at the other companies around and said
they need to put waste treatment plants in also. The real problem
is in the U.S. A lot of the facilities here are old. It's much
more expensive when you put it on at the end, than if you figure
out a way not to have it in the beginning.
Audience question: The thing we struggle with the most in this
somewhat baffling world of corporate social responsibility is
how do we balance competing interests? How can we be socially
responsible parties and still meet all the other myriad stakeholder
demands?
Luber: Limits are legitimate. There
are all sorts of people with all kinds of demands. What we
want to see at the end of the day
is a decrease in carbon emissions, because otherwise, we can't
sustain our planet, and there will be negative financial implications
for our economy, and for every industry. What we need to do is
stop the battling and come up with some realistic plans. Some
regulation is coming. Some number of utility executives said “Let's
just get it done now so we eliminate the risk.” Eventually
it's about us collectively educating Wall Street.
Audience question: What is the role of consumer responsibility
in this equation?
Tebo: American consumers, in my opinion,
have shown no interest in the environment, period. They drive
huge cars with ‘Save
the Polar Bear’ plates. I'm a firm believer that you can't
depend on the consumer to make changes.
Portney: I actually like the idea of involving consumers more.
If consumers know where their energy is coming from, and if they
have a strong preference for green electricity then they're going
to put pressure on American Electric Power by buying electricity
from its competitors. I think the information provision and consumer
action should be a big part of the arsenal that we use for environmental
improvement.
Audience question: Is there something different in the model
in Europe that leads to a greater interest in talking about climate
change and global warming and corporate responsibility?
Luber: Europe is way ahead of us on almost everything, thanks
to the European reinsurers. They added up the numbers and they
said, the risk from climate change, if companies don't act, is
in the hundreds of billions of dollars. Also their use of smaller
cars is about a certain psychology and philosophy that has existed
for decades. What is it going to take here? Leadership is about
making sure that we don't see thousands of cases of asthma going
up in every city because of more pollution and more particulate
matter, because somebody didn't want to put scrubbers on their
plants. |