We all agree that companies should be responsible for any adverse impact of their actions on consumers or other stakeholders. But the extent of their liability is tough to measure. To grasp the challenge of this issue, consider this scenario – Should a cab driver ask for the exact nature of your trip to decide if he should give you the ride? If you think this is absurd, imagine if you were running away from a crime scene or going to one – he did play a central role without really meaning to do so. Some versions of this are becoming real issues that businesses are facing – from banking, to technology and internet companies. Should HSBC have a view on how its customers acquired their money, or should they just focus on providing the best service to anyone who seeks their advise? Should Youtube offer a video platform to anyone who wishes to express themselves, or should they turn into a moral policeman too? Should Facebook block a hate group on its social platform, or should it focus on building the best social networking functionality available to all?
Till now, businesses had a single focus – deliver shareholder value, which was typically just about enhancing profits and ROC. The only rule they had to keep in mind is that they break no law. But now businesses are facing much more complex issues – the unintended consequences of the services they offer, and their impact. Should businesses have a view point on freedom of expression when the local government wants to curb it? At what point does tax efficiency become tax evasion? Wage arbitrage comes with its own moral dilemmas of what benefits do you want to extend one set of workers vs another.
The challenge is no more about profitability but about sustainability and long term survival. With companies starting to play much bigger roles than even nation states in the lives of local communities and having a greater impact on natural resources, they are facing many such moral dilemmas. If profitability is coming from underpaying workers and not investing on workers welfare, then soon you will be facing a PR debacle that could wipe out the companies heritage. If to exploit a market like China, you need to share your customer’s information, you will lose trust of customers globally who will abandon you, therefore making your survival difficult.
Larger companies are already being forced to revisit their philosophies. Pepsi is embarking on Performance with Purpose in the face of growing heath concerns of its products, Starbucks has agreed to pay more taxes in the face of customer backlash in UK, Glencore is facing increasing scrutiny of its tax practices across the globe as it pays lesser local taxes despite the soaring prices of the commodities it extracts from the worlds poorest countries. Apple is having to open factories in the USA, despite the higher wage bill it will have to incur to help with job growth in its home market of USA.
Companies are increasingly being held accountable by the communities where they operate. The question is really about the core values that should drive Businesses. To survive this emerging consumer activism, companies will need to clarify their values and vision in a broader social context than just competition or their shareholders. Business values and vision are mostly just some fancy meaningless clichés kept at the front desk of companies. But soon companies will have to revisit and maybe rewrite them, and use them as guiding principles for decision making.
Mr. Rahul Balyan is an MBA from IIM Calcutta. He blogs about issues related to marketing and culture.
Read more about his views here: http://www.rahulbalyan.com/
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