Ecological Modernization and Corporate Social Responsibility - Research Paper Example

Ecological Modernization and Corporate Social Responsibility Introduction Ecological modernization is founded on a concept that requires a measure of environmental consciousness in the approach to technology and innovation.1 Corporate social responsibility is a term used to refer to initiatives and discretionary practices by corporate citizens for the well-being of communities via corporate resources.2 Since corporate social responsibility calculates a company’s success by virtue of a “triple bottom line”, namely, the financial bottom line, its social bottom line and its environmental bottom line,3 ecological modernization may function as a basis for an equivalent policy paradigm for corporate social responsibility. The main question for consideration however, is whether ecological modernization alone can satisfy all of the company’s stakeholders. After all, a company’s “social license” is only “validated by good corporate citizenship” that takes account of all of the company’s stakeholders.4 This paper argues that while ecological modernization can serve as an equivalent paradigm for corporate social responsibility if it can incorporate a strategy that serves the interest of all stakeholders. The Theory of Ecological Modernization During the decade of the 1960s and the 1970s social scientists increasingly focused attention on explaining how human conduct, capitalist organizations, mass consumption, government and state policies and industrial and technological innovations caused the depletion of the environment.5 By the decade of the 1980s and more so in the 1990s, environmental politics and sociology began to focus more sharply on environmental reform.6 By the year 2000, environmental sociology and politics was primarily aimed at understanding and promoting environmental reform with less attention of seeking explanations for environmental destruction.7 Under the auspices of environmental reformation, ecological modernization takes its place as perhaps the most common and often used basis for environmental reform.8 In a very broad sense, ecological modernization as come to be viewed as a method of social scientific construction of reforming environmental practices and policies at various levels of the modern world.9 In this regard, ecological modernization focuses on how social actors, institutions and individuals can meld environmental issues in daily activities, relationships and developments with the natural environment. The overall result is that environmental concerns are becoming a focal point in relations and institutionalization together with modern values, cultures and daily conduct.10 Christoff explains that ecological modernization: “…is emerging as a fashionable new term to describe recent changes in environmental policy and politics. Its growing popularity derives in part from the suggestive power of its combined appeal to notions of development and modernity, and to ecological critique.”11 One of the most significant aspects of this emerging trend is the emphasis it places on narrowing the gap between economic interests and environmental depletion. Three movements may be said to have contributed to the emergence of ecological modernization. First, the World Commission on Environment and Development published a report, Our Common Future, popularly known as the Burndtland Report in 1987.12 The Burndtland Report aimed at putting the protection of the environment together with economic development on the forefront of both political and public agendas on a global level.13 The World Summit on Environment and Development in Rio de Janeiro in 1992 can be described as the second movement promoting ecological modernization. The summit emphasized that biodiversity loss, climatic changes, desertification and water shortages were common global concerns. In the years that followed it was difficult for “anyone on the planet” to claim that they were unaware of the environmental consequences of industrialization and modernization in general and that there was a dire need to make changes at virtually all levels of civilization.14 The third ecological modernization movement can be attributed to Al Gore’s publication of An Inconvenient Truth: The Crisis of Global Warning in 2006.15 Gore’s treatise highlighted the reality of the physical destruction of the environment and argued that anyone who cared about the environment would take responsibility for it by either producing or consume products or services that were environmentally friendly.16 These movements are directly related to companies who for the most part support and drive the economy through sustainable development. Sustainable development is closely tied to ecological modernization because it draws attention to the divide between development and the environment. In other words, the primary question is whether or not development can be achieved without contributing to the destruction of the environment.17 Even so, Langhelle argues that although sustainable development and ecological modernizaztion often have the same policy considerations in some areas only.18 Lenghelle explains that: “The two concepts have different frames of reference, and are directed towards different problems, which, in turn, leads to different goals for environmental policy.”19 The distinction between these two concepts are important for evaluating whether or not ecological modernization can provide an equivalent policy paradigm for corporate social responsibility. If the concept of sustainable development has not been able to provoke an appreciable level of corporate social responsibilities strategies, it may not be possible for ecological modernization to achieve a better policy response from corporate citizens. This is so, because sustainable development is aimed directly at development, a major characteristic of corporate citizens. Ecological modernization is directed toward the world at large. The Burndtland Report describes sustainable development as: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”20 However, when one considers the premise of ecological modernization however, this theory may be better suited as a paradigm for corporate social responsibilities than the concept of sustainable development. The latter insist more broadly on social justice between generations while ecological modernization is directed at current industrialization and modern technology,21 both of which are pivotal parts of corporate activities. When ecological modernization is viewed as a means for continued modernization and technological development as a means of resolving the damages to the environment, it is more conducive to current corporate social responsibilities. For instance it has been argued that the environmental crisis is best resolved by “further advancement of technology and industrialization.”22 The perception is that ecological modernization will only be effectively achieved through both modernizing ecology and political institutions.23 One thing is abundantly clear and that is that ecological modernization requires reform of consumption and production patterns in order to prevent further damaged to the physical environment.24 Since corporate citizens interact with consumers and are for the most part engaged in production processes, they are implicitly responsible for shaping production and consumption patterns. If ecological modernization is going to have an impact, it will require some policy and practice modification by the world’s corporate citizens. The question then turns on whether or not ecological modernization can represent an equivalent policy paradigm for corporate social responsibilities. Corporate Social Responsibilities and Ecological Modernization Corporate social responsibility can be best understood by reference to the three words contained in the actual phrase, “corporate, social and responsibility.”25 Collectively the phrase refers to the interaction between companies as well as other organizations and the communities/societies in which they impact.26 Corporate social responsibility also refers to the respective responsibilities of both the corporate citizen and the members of the impacted societies.27 Society in the context of corporate social responsibilities is described as: “all stakeholder and constituent groups that maintain al ongoing interest in the organization’s operation.”28 A broader concept of corporate social responsibilities encapsulates the concept that: “…businesses are more than just profit seeking entities and, therefore, also have an obligation to benefit society.”29 Stakeholders include a broad range of individuals and groups and include, employees, suppliers, consumers, shareholders, creditors, “regulating authorities, local communities and the environment.30 Ultimately, companies have a duty to balance the competing interests of these stakeholders and this is particularly important for achieving “legitimacy and accountability.”31 The World Business Council for Sustainable Development describes corporate social responsibility as: “business’ commitment to contribute to sustainable economic development, working with employees, their families, the local community, and society at large to improve the quality of life.”32 Business for Social Responsibility describes corporate social responsibility as: “…operating a business in a manner that meets or exceeds the ethical, legal, commercial, and public expectations that society has of business.”33 Having regard to the role that corporate social responsibilities command of corporate citizens, a company is expected to engage in social accounting. Social accounting involves conveying both the environmental and social consequences of a company’s business conduct to specific societal interest groups as well as the entire community in which the company operates or impacts.34 To this end a number of social reporting guidelines have been developed for promoting corporate social responsibilities within a regulatory framework. John Elkington’s Triple Bottom Line indicates that ecological modernization is a realistic paradigm for managing corporate social responsibilities and serves as the guiding principle for AccountAbilitys AA 1000 social accounting guideline.35 Elkington’s Triple Bottom Line envisages a sharp distinction between commitment to shareholders and commitment to stakeholders. In focusing on the latter the emphasis is on “people, planet and profit,” within the framework of sustainability.36 A corporation’s social responsibility is to its stakeholders and not to maximizing profits for the benefit of shareholders.37 Capitalizing on Elkington’s Triple Bottom Line, the AA1000 is aimed at supporting: “organizational learning and overall performance – social and ethical, environmental and economic – and hence organizations’ contributions towards a path of sustainable development.”38 Other corporate social responsibility accounting standards encapsulating or capable of accommodating ecological modernization include the Global Reporting Initiative’s Sustainability Reporting Guidelines,39 The ISO 1400 environmental management standard,40 and the United Nations Intergovernmental Working Groups of Experts on International Standards of Accounting and Reporting.41 Obviously, the objective of these social accounting standards is to encourage corporate citizens to strategize, plan and adapt performance strategies that focus on social and environmental accountability.42 The greatest difficulty for adapting a social and environmental accounting standard is the fact that environmental and social accountability cannot be measured with any reliable degree of accuracy.43 Moreover, there is the perception that businesses exist for the sole purpose of maximizing profits for shareholders and any inclination toward social accountability is disingenuous.44 The perception is that businesses pay mere lip service to social responsibilities, viewing it as a means to enhance its reputation within the community and thereby increase its profits.45 In the broader picture, many corporate citizens and businesses in general are caught between transforming, “investment value to incorporate other non-financial factors.”46 The reality is, that in the absence of a strong incentive to reform organizational strategies and business planning, financial incentives primarily drive corporate commitment or lack thereof to corporate social responsibilities.47 Stakeholder theorists however, have an entirely different view of corporate commitment to social responsibilities. These theorists argue that corporate social responsibility is: “…a form of investment that allows a firm to differentiate its products and processes.”48 The demand for products generated as a result of corporate social responsibility can originate from consumers as well as investors.49 From a company’s economic agenda, it is also argued that competing on a level that commands commitment to corporate social responsibility and attention to prices is far more beneficial to corporate success than competing “on price alone.”50 In this regard, corporate social responsibility emerges as a “product or service strategy designed to sustain a competitive advantage.”51 The main question is whether or not ecological modernization can serve as an equivalent policy paradigm for corporate social responsibility. In light of the varying arguments with respect to shareholder primacy versus stakeholder theories, it is obvious that much will depend on whether or not a company is capable of implementing strategies within an ecological framework that is conducive to its business agenda. It is also obvious from these opposing theories that in order for ecological modernization to work as an equivalent paradigm for corporate social responsibility it has to be economically viable for the company. In other words, all stakeholders must have an interest in the environmental strategies employed by the company. For example, if consumers are not inclined to support a company’s environmental strategies, the company’s finances becomes compromised. The fact is, ecological modernization theorists advocate that: “financial markets will take note of changes in environmental behavior that capture financial benefits: more efficient use of resources leading to lower production costs, or the creation of new environmentally-friendly products answering specific market demands. But improvements in environmental behavior that capture no financial benefit for firms, and by implication their investors, will be largely discounted.”52 David Vogel argues that businesses and investors who do pay tribute to ecological/environmental issues are by and large motivated by: “…their corporate strategy and business identity: it is a way for them to differentiate themselves from their competitors.”53 If all companies adapted an environmental friendly approach to business output and input, there would be nothing to gain from attempts to distinguish one company’s goods from another.54 The fact is, large companies that are almost entirely in the public spotlight are more inclined to pay close attention to their social and environmental practices and policies as a means of countering activism by non-governmental organizations who primarily aim at attacking the company’s brands.55 Small companies on the other hand, typically have no real incentive to concern themselves with environmental practices and policies, at least not to the degree and extent that would require restructuring company policies and practices. In order for ecological modernization to act as an equivalent paradigm for corporate social responsibilities all stakeholders, including investors, shareholders and external stakeholders would have to be in agreement with this approach. As Banerjee explains, the current: “neo-liberal model with its economic assumptions of fundamentally competitive social relations can only produce a narrow and self-serving view of social responsibility.”56 The most that can be expected is sporadic cooperation among stakeholders and corporations when mutual self-interests are aligned and in accord with one another and only when corporate movers are satisfied that ecological modernization pays dividends.57 In the final analysis, shareholders rather than stakeholders in the broad sense of the word, compel and direct corporate conduct and responsibilities. Economists typically take the position that it is very unlikely that shareholders will pass resolutions that insist that corporations focus more profoundly on social responsibilities unless the market competition requires it.58 However, when one looks at ecological modernization with its international backing and global calls for environmental reformation, shareholders may be more inclined to compel corporate restructuring to accommodate the strategies that seek to preserve the environment. Conclusion There is no doubt that a corporation’s legitimacy and reputation depends largely on its social conscience since it interacts with society.59 There are a number of ways in which a corporation can fulfill its corporate social responsibilities. This is particularly so since the concept itself is a voluntary and discretionary exercise, requiring a balancing of the narrow concept of stakeholder interest and the broader concept of stakeholder interests. In the UK, the Companies Act 2006 mandates that the company’s directors conduct the companies affairs in the best interest of the company’s members and this includes taking account of the broader community interests.60 However, a lot will depend on the corporation’s objects and business interests and its shareholders interests. Ecological modernization can be an appropriate equivalent policy paradigm for corporate social responsibilities only in circumstances where relevant market segments command/support it and the company’s resources permit reformed production of environmentally friendly products. Ecological modernization should certainly be a part of any company’s policy paradigm since the environment is every person’s responsibility. Be that as it may, ecological modernization cannot be the only and prevailing policy paradigm. It has to be coordinated with other interests, more especially, stakeholder interest in both the narrow and broad sense. Bibliography Banerjee, S. (2007) Corporate Social Responsibility: The Good, the Bad and the Ugly. Edward Elgar Publishing Beck, U. and Willms, J. (2004) Conversations with Ulrich Beck. Cambridge: Polity Press Bennet, M.; James, P. and Klinkers, L. (1999) Sustainable Measures. Greenleaf Publications Buttel, F. (2003) “Environmental Sociology and the Explanation of Environmental Reform.” Organization and Environment. Vol. 16(3), 306-344 Christoff, P. (1996) “Ecological Modernisation: Ecological Modernities.” Environmental Politics Vol. 5(3), 476-500 Companies Act 2006 Elkington, J. (1994) “Towards the Sustainable Corporation: Win-win-win Business Strategies for Sustainable Development”. California Management Review, Vol. 36, 90-100 Fisher, D. and Freudenburg, W. (2001) “Ecological Modernization and its Critics: Assessing the Past and Looking Toward the Future.” Society and Natural Resources Vol. 14, 701-709 Friedman, M. (Sept. 13, 1970) “The Social Responsibility of Business is to Increase its Profits.” The New York Times Magazine. http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html Retrieved May 15, 2009 Gore, A. (2006) An Inconvenient Truth: The Crisis of Global Warming. New York: Viking Gray, R.; Owen, D. and Maunders, K. (1987) Corporate Social Reporting: Accounting and Accountability. Hemel Hempstead: Prentice Hall Janicke, M.(2008) “Ecological Modernisation: New Perspectives.” Journal of Cleaner Production, Vol. 16, 557-565 Kaussek, J. (2007) Environmental Management Quick and Easy. ASQ Quality Press Kotler, P. and Lee, N. (2005) Corporate Social Responsibility: Doing The Most Good For Your Company and Your Cause. John Wiley and Sons Lehman, G. (2002) “Reclaiming the Public Sphere: Problems and Prospects for Corporate Social and Environmental Accounting.” Critical Perspectives on Accounting, Vol. 12(6), 1-21 Leipziger, D. (2003) The Corporate Responsibility Code Book. Greenleaf Publishing Lele, S. (1991) “Sustainable Development: A Critical Review.” World Development Vol. 19(6), 607-621 Mulberg, J. (2003) “Environment and Sociology: The State of the Debate.” Global Environmental Politics, Vol. 3(1) 125-142 Pepper, D. (1984) The Roots of Modern Environmentalism. London: Croom Helm Perrini, F.; Pogutz, S. and Tencati, A. (2006) Developing Corporate Social Responsibility: A European Perspective. Edward Elgar Publishing Richardson, B. (2008) Socially Responsible Investment Law: Regulating the Unseen Polluters. Oxford University Press Sonnenfeld, D. (2002) “Social Movements and Ecological Modernizatin: The Transformation of Pulp and Paper Manufacturing.” Development and Change, Vol. 33(1), 1-27 Spaargen, G. and Mol, A. (1992) Sociology, Environment, and Modernity: Ecological Modernization as a Theory of Social Change.” Society and Natural Resources, Vol. 5(4), 323-344 Visser, W. and Matten, D. (2008) The A to Z of Corporate Social Responsibility: A Complete Reference Guide to Concepts, Codes and Organisations. Business for Social Responsibility Vogel, D. (2005) The Market Virtue. The Potential and Limits of Corporate Social Responsibility. Brookings Institution Press Waygood, S. (2006) Capital Market Campaigning. The Impact of NGOs on Companies, Shareholder Value and Reputational Risk. Risk Books Walton, P. and Aeerts, W. (2006) Global Financial Accounting and Reporting: Principles and Analysis. Cengage Learning EMEA Werther W. and Chandler, D. (2005) Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. Sage World Business Council for Sustainable Development. (n.d.) “Getting On Board with Corporate Social Responsibility.” http://www.wbcsd.org/plugins/DocSearch/details.asp?txtDocTitle=corporate%20social%20responsibility&txtDocText=corporate%20social%20responsibility&DocTypeId=-1&ObjectId=MzEyMDA&URLBack=result.asp%3FtxtDocTitle%3Dcorporate+social+responsibility%26txtDocText%3Dcorporate+social+responsibility%26DocTypeId%3D-1%26SortOrder%3D%26CurPage%3D3 Retrieved May 15, 2009. World Commission on Environment and Development. (1987) Our Common Future. Oxford University Press Read More