Social Responsibility

The striving for social responsibility takes many forms. Grameen Bank (www.grameen-info.org) and its founder, Muhammad Yunus, received the 2006 Nobel Prize for furthering peace and human rights by providing economic opportunities that conventional banks would not. Working Assets (www.workingassets.com) preassigns a portion of its revenues to activist causes. Socially responsible investing uses published criteria to recommend investment vehicles and to initiate stockholder actions in support of particular principles.

Advocacy organizations pursue a wide variety of principles. The Saltwater Institute advocates five values: (a) family and community responsibility, (b) respect and appreciation for the natural world, (c) service and stewardship, (d) the necessity for work and productivity, and (e) an intentional commitment to goodness (www.saltwater.org/our_story/beliefs.htm). Scientists for Global Responsibility (www.sgr.org.uk) opt for openness, accountability, peace, social justice and environmental sustainability, while Computer Professionals for Social Responsibility (www.cpsr.org) address technological problems in the light of technology-related principles.

Until the late 19th century, corporate charters in the United States confined a company to a specific purpose in the common good. For example, an 1823 act of the New York legislature incorporated the Delaware and Hudson Canal Company with a charter to build and maintain, with private investment, a canal between the Delaware and Hudson rivers and to charge regulated fees for the transport of coal and other goods. Any other activity by the corporation, such as setting up a bank, required an amendment to its charter (Whitford, 1905). A recent form of the socially-responsible corporate charter is the Community Interest Company ( www.cicregulator.gov.uk).

In 1970, the economist Milton Friedman wrote that "The social responsibility of business is to maximize its profits." Invoking the authority of Adam Smith to claim that society most benefits if everyone pursues selfish advantage, Friedman paved the way for some businesses to ignore the wider impacts of their pursuit of low costs, increasing sales, and big financial returns, and to consider themselves accountable only to owners and regulators. In turn, this gave rise to the tyranny of the financial bottom line; any attempt at purposeful social progress needs to overcome the myth that social progress takes place of its own accord.

Activism on behalf of principles other than self-interest or convenience is necessary to remind selfish businesses of their social responsibility, and to prevent other organizations from losing touch with theirs. This activism can take place outside the organization, in citizen groups and political platforms, or within the organization as the individual actions of the tempered radical (Meyerson, 1995) and in the form of changes to policy and governance. In these efforts, the struggle of advocacy is at least as important as the specific principles being advocated. Social responsibility does not depend upon any one principle of conduct.

To be socially responsible is to be accountable to a full range of interested parties for the achievement of clearly-stated goals. It calls for: (a) clear vision, values and strategy for a better future; (b) understanding and management of expectations; (c) actions compatible with vision and values; (d) monitoring of outcomes; (e) accountability for results; and (f) a culture and governance that makes this possible. A socially responsible organization acts on the basis of clear values, which may explicitly include measurable results, transparency and accountability (e.g. www.gfusa.org/about_us/values).

Any organization has internal and external stakeholders: customers and constituencies which both contribute to and benefit from the organization's work. For example, the Citizens Advice Bureau (2004) considers stakeholders to include potential and actual clients, volunteers, staff, partners, policy makers, and government bodies. No two of these customers of constituencies have the same expectations. A socially responsible organization makes itself accountable to stakeholders according to the unique expectations of each group, and always consistently with its values and strategy.

Accountability to stakeholders measures actual performance against predetermined goals. It does not simply describe what an organization has achieved in the past, but requires commitment to achievements in advance. To be accountable is to measure indicators of performance that affect stakeholders, and to make the results transparent—that is, to report outcomes to stakeholders as evidence that the organization is fulfilling its goals and enacting its values. One example is a set of performance indicators for microfinance institutions ( www.swwb.org/English/2000/performance_standards_in_microfinance.htm).

Any organization devoted to serving others is measured every time someone walks in or logs on—indeed, whenever anyone even drives past the building or happens upon the web site. A commitment to achieve social benefits does not absolve a not-for-profit from thinking of the people it serves as customers, and to consider its relations with them as marketing (Brinckerhoff, 2003). To clearly understand perspectives from outside the organization is a first step toward measuring and improving the organization's impact.

Social responsibility requires accountability, but for what and to whom? Several frameworks exist for measures of accountability. The Balanced Scorecard (Kaplan & Norton, 1992) suggests four linked categories: financial, customer, internal business, and innovation and learning. These categories are linked to strategy because improvement in any one will benefit all the others (except that no direct relationship is claimed between the first and the last). Epstein and Birchard (1999) propose three categories: financial, operational, and social.

A "stakeholder scorecard" (Epstein & Birchard, 1999, p. 96) uses the major stakeholders as categories of performance measures. This approach directly measures how the organization serves its stakeholders, and orients strategy towards those with an interest in the outcomes. Stakeholders may fall into predetermined categories, such as shareholders, customers, employees and communities (Epstein & Birchard, 1999); alternatively, they may simply appear as a list of specific categories of stakeholder most important to the organization.

No organization, whether for-profit or not-for-profit, is socially responsible simply by virtue of its intent to achieve social benefits. Action consistent with the organization's espoused values demands a culture—ethical assumptions, values, beliefs and behaviors—that pervades the organization from top to bottom. Without a culture of demonstrable consistency between espoused and practiced values, claims to social responsibility are at best window-dressing, and at worst a symptom of a demoralized, failing and unethical organization. By contrast, a culture of accountability makes an organization more effective and more sustainable; social responsibility demands nothing less.