I read an article yesterday about Pepsi's efforts to be more environmentally responsible…but this article didn't give Pepsi a pat on the back for social responsibility. This article was deriding Pepsi for investing in risky activities that might not be profitable for its shareholders. Citing the Free Enterprise Action Fund, the article emphasized that businesses should live by the sole principle of generating profits for their shareholders. Indeed, that idea makes sense – I was taught that the purpose of business is to generate profits and that they should all have competitors so that each business must compete to make the most money and the cheapest product. This free market "game" is supposed to ensure that the most efficient processes prevail and consumers get to choose the cheapest products.
But there is a slight problem with this model. In an effort to drive down prices and make big profits for CEOs and shareholders, most business practices are destroying the environment, depleting resources, and not paying suppliers and/or workers fair wages. When we created this "game" we call the free market, we forgot to include checks and balances that protect the common good and future generations.
Currently, we rely on the government to provide the checks and balances that protect the common good – in the U.S., the EPA is supposed to regulate pollution etc, the FDA is supposed to make sure products don't harm our health, and we rely on laws (and unions) to protect workers' rights. But relative to the size and scale of companies, especially large corporations, these checks and balances are tiny, and the organizations protecting the common good are underfunded and understaffed. Further, the government organizations that are supposed to be working for the good of the people rely on lobbying groups (often funded by large corporations) to inform them about issues that might harm the common good.
Some businesses have introduced the concept of the "triple bottom line" so that their companies strive not only for maximum profits but for social and environmental "profits" also. However, until shareholders, governments, consumers, and the international community are all on board, these companies will struggle to compete with those who strive to increase profits at all costs.
Do you think corporations should play a greater role in promoting social justice and environmental protection? Do you think the government should play a greater role? What role can consumers play and how can we educate ourselves?
Tuesday, April 1, 2008
Pepsi did WHAT????
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3 comments:
Very interesting questions. I just finished attending a conference on Microeconomic Opportunities for Youth which largely addressed social business enterprise. For more on the conference, visit the Grameen Foundation Blog at http://grameenfoundation.wordpress.com/. This was a fascinating conference that really drove home ideas about social business and opportunities for a triple bottom line. I think that corporations should play a larger role, and I think as they do, the market will follow. Social business is still about business in the sense that both profits in the form of money, AND benefits, both environmental and social can be achieved. Perhaps as this market grows, the hidden costs and benefits of the environment will become more apparent in everyday economic speak. In addition, this may have a positive impact in the development world by helping to "green GDP" or expand indicators of human well being to include more than just income. It all has to start somewhere. Thanks for raising the question!
Wow, thanks for telling us about the Microeconomic Opportunities for Youth! It is indeed inspiring to hear about business ventures that understand and live by the triple bottom line. When I read about organizations like the Free Enterprise Action Fund, I worry that those seeking profits and ignoring moral implications will continue to make the most money and therefore gain the most power, creating unfair competition for "the good guys". Somehow, we have allowed certain types of immoral exploitation to be not only legal, but also profitable. In today's global economy, it would seem that some type of international governing body needs to enforce an international law to protect people and the environment from unfair exploitation by companies.
Apologies for being a month and a half late on my comment... I participated for 4 years in the Coke boycott, protesting Coke's environmental abuses in India and human rights/ labor abuses in Columbia. The organizers of the boycott called for divestment in ALL of the companies that Coke owns. This includes everything from Minute Maid and Suntrust bank to Odwalla and recently acquired Honest Tea. Personally, I think the boycott would have been way more effective if they'd just singled out Coke, the beverage itself, but I believe strongly in voting with my dollar so I cut out everything from Suntrust to Odwalla.
Now I'm fed up, and I'd like to consider supporting companies like Honest Tea. Again, I think it's very important to vote with our dollars, and I would like to support the shares of companies that are devoted to producing goods in a more sustainable, eco-friendly, human rights- friendly fashion. However, it a difficult call because a) it's hard to tell whether not the company retained its ethos after being bought out and b) you are still technically supporting a company that's doing some very unethical things. Even those of us who are relatively informed on these issues have trouble deciding what the best choice is.
I'm not sure exactly what the solution is-- consumers need to demand more ethical products, but we also need oversight from an independent entity to help us sort through the mess and punish the offenders.
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