When we think about the future of corporate responsibility, we think about not only what might be, but what has been. For a long time, the conversation centered around corporate social responsibility (CSR) and typically involved highlighting actions that furthered some social goal that was both beyond the interests of the firm and what is required by law. More and more, managers face challenges that require them to take an integrated approach that balances legal, economic, ethical, environmental, and societal concerns across a variety of stakeholders. Today, responsibility is no longer about discrete actions but rather a set of long-standing efforts to create value and adhere to purpose.
At the same time, managers exist in a society where certain fundamental problems, such as worsening environmental degradation and social inequality, are central factors driving increased corporate engagement. These can, at least in part, be directly attributed to corporate activity. As a result, many believe there is a corresponding responsibility on the part of corporations to do something about these problems. Historically, we have been able to tell when a company is being irresponsible (e.g., “greenwashing” or causing other types of harm). In fact, as I argued in a previous article, there are various degrees of harm that can elevate a firm’s irresponsibility. But what we mean by responsible behavior (and what label we use) has somehow become a focus in and of itself.
Over the past decade, we’ve seen an increase in discussions about what it means to be a responsible business. Many businesses use the term “sustainability” to cover all their responsible business practices. Others use environmental, social, and governance (ESG). Not surprisingly, questions have emerged about how and whether these terms relate. Some believe that while CSR aims to make a business accountable, ESG criteria make the business’s efforts measurable. ESG is tied to various sustainability reporting frameworks, whereas CSR can consist of brand- and culture-building statements. And yet, according to news from 2024’s World Economic Forum Annual Meeting in Davos-Klosters, Switzerland, executives and boards of directors are seeking new ways to tout corporate responsibility while omitting the term “ESG” to avoid alienating investors, customers, and employees. One factor is the wave of anti-ESG legislation in the US during 2023 and similar anti-ESG sentiment brewing in Europe.
Although ESG has generally been aimed at capital and growth building, ESG investing has faced challenges, too. The use of “ESG” in corporate earnings calls, whose content is an indicator of company goals, is at its lowest since 2020. Rolling the three ESG pillars into a single rating has allowed carbon-intensive companies to log positive ESG scores, and some mutual funds and exchange-traded funds have been accused of greenwashing, using ESG in their fund names with no corresponding change in their investment holdings.
Still, it’s hard to argue that a business acting as a good citizen in the communities where it is located, paying taxes on the profits it makes, and compensating employees fairly is not a responsible business. Partly because of this recognition, some business leaders argued in the Wall Street Journal that the term “responsible business” should be used instead of CSR or ESG.
Amid these concerns, sustainability and accountability still matter to many consumers and investors, as well as to employees. Gen Z and Millennials, for instance, show a preference for purpose-driven companies. Many would leave their current job for one that has a more positive impact — even if it impacts their pay — according to the latest “Business in Society Report” by Bentley University and Gallup. A full 71% of workers under age 30 took that stance. And 29% of them said they would even accept a 10% pay cut to do more meaningful work.
As a result, the contemporary context of corporate responsibility involves a deep and wide set of concepts and tasks. Fundamentally, it involves working with multiple stakeholders and a range of disciplines. Managers then face decisions around how to take ownership of a number of company impacts throughout the value chain, including design, production, marketing, sales, and communications. And because corporate responsibility is tethered to calls for greater accountability, managers must also consider how their corporate governance framework serves to encourage, restrict, and ultimately shape the company’s relationship with society.
[For more insights on the future of corporate responsibility, see our full Amplify issue on the topic.]
