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.

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.