Manufacturing & Society: Practicing The Principles

Oct. 6, 2005
Company social responsibility, appropriately, remains a serious work in progress.

How many times have you heard a child ask, "Are we there yet?" The responsibilities that manufacturers have to society -- to their employees, their customers, their suppliers, the communities in which they operate and, if they are publicly held, to their shareholders -- are not "there" yet. Yet company social responsibility is a serious work in progress, certainly not child's play. "All multinational corporations have a responsibility to leverage their economic power and unique assets to have a net positive impact on the world," asserts Palo Alto, Calif.-based Hewlett-Packard Development Co. LP.

The basic social responsibility of a manufacturing company is to stay in business, a principle that Jane Nelson, director of the Corporate Social Responsibility Initiative at Harvard University's Kennedy School of Government extends to business generally. But social responsibility also must be so integral to what a manufacturer is about that if the company fails to meet what it defines as social responsibility the company must be judged to be at least a partial failure. "What we have learned over time is that the work we do around the world to advance social and economic development and environmental sustainability is not separate from our long-term business goals, but fundamental to them," emphasized Debra Dunn, HP's senior vice president of corporate affairs and global citizenship in the company's 2005 Global Citizenship Report.

In practice, social responsibility is likely not to be a single program but a number of efforts, some continuing for years and others lasting for only days or months, such as the South Asia tsunami relief efforts several U.S. manufacturers undertook earlier this year. For the longer term, Procter & Gamble Co. and HP, for example, focus many of their social responsibility programs on education and environmental protection. Deere & Co., in 2004, began a company-wide health and safety audit program to help protect its employees, a program that Chairman and CEO Robert W. Lane notes is similar to the environmental management system audit Deere has had since 1993. SAS Institute Inc., self-described as the world's largest privately held producer of computer software, looks after employees on its Cary, N.C., campus with child day-care facilities, fitness centers, playing fields and hiking trails. And CEO James Goodnight recognizes people need to have lives outside work and will tell them to turn off the lights and go home if he sees them working past 6 p.m.

Manufacturing & Society

This is the sixth and final essay about the social and economic responsibilities of manufacturers written by Senior Editor John S. McClenahen as part of IndustryWeek's 35th anniversary year. Previous essays appeared in the January, March, May, July and September issues and can be found here.
Social responsibility begins at the top with CEOs such as Lane and Goodnight, whether a company is big, small or somewhere between. CEOs and other senior executives have a responsibility to help define social responsibility for their companies, to devise strategies, to lead the execution of those strategies, and to partner with other groups and to participate in the hands-on training being offered by such institutions as the Business Roundtable Institute for Corporate Ethics at the University of Virginia's Darden School in Charlottesville. CEOs and other senior executives need to be champions of social responsibility and to create a culture in which it thrives. Executives need to be part of putting the principles of social responsibility into practice every day. But however well-intentioned, senior executives should not be, nor become, commanders of social responsibility. They should, for example, appreciate that corporate-promoted volunteerism is not for everyone. Some employees may have young children or elderly parents who are their first priorities in their off-the-job hours. What's more, some employees may believe that volunteering is a purely personal choice, including whether or not to do volunteer work. Recognizing such realities is part of an executive's social responsibility.

If they are to be credible with their employees or among their peers, manufacturing executives must be on guard against mouthing the nearly indecipherable jargon that social responsibility advisers increasingly employ. Consider this sentence: "The value proposition breaks out of the strictures that justify corporate citizenship primarily through a business case." Or these sentences: "Leading companies are looking to replace the traditional ways of practicing corporate citizenship with a more strategic and integrated model. At the core of this transition is the recognition that corporate values have to be taken more seriously and be operationalized throughout the company." The Center for Corporate Citizenship at Boston College, the source of these statements, could be a stronger and more effective force for change if only its messages were clearer.

Contrast the center's sentences with the way General Electric Co. Chairman and CEO Jeffrey R. Immelt explained GE's "Ecomagination" socially responsive environmental initiative to IndustryWeek. "This is not just good for society, it's good for GE investors -- we can solve tough global problems and make money doing it," Immelt said.

Not so incidentally, Immelt is more than refreshingly clear. He's also challenging the economic wisdom of Adam Smith and Smith's latter-day disciples. In 1776, in "The Wealth of Nations," Smith wrote, "I have never known much good done by those who affected to trade for the public good."

In a late-August report, the Conference Board, a New York-based business research group, lauded five companies, including HP and P&G, for integrating the reporting of their corporate citizenship efforts into their basic business missions. That's significant, for there's a danger that the company social responsibility reports now piling up could become simply page after page of listed good deeds, words not matched within the company by the true creation of capitalism that has a conscience.

Yet for all the attention company social responsibility is receiving, for the commitments being made and the variety of efforts being undertaken, there remains a serious question of whether it matters on Wall Street. Put bluntly, the question is: Can socially responsible manufacturers survive? The answer is not simple. Investors are going to look at the bottom line, not at socially responsible activities, believes John B. Byrd III, president of AMT-The Association for Manufacturing Technology, McLean, Va. "That being said, the benefit of doing those things creates a perception in the mind of the employee that this is a good place to work. And if the corporation cannot attract good employees, then they have no chance of realizing a reasonable profit.

"I definitely think [being socially responsible] is a good thing. But at the end of the day, is an investor going to make an investment based on social responsibility? I don't think so."

Company social responsibility is very much a work in progress, as it should be if it is to reflect the dynamic quality of the global marketplace. The definitions of what creating value with values means for manufacturers continue to evolve and to be challenged. Immelt and GE are attracting much of the attention now -- at least among the media. The markets -- and not just financial markets -- will make choices. In the meantime, scores of companies, including such other large initialed companies as HP, P&G and BP PLC, bear watching for what works -- and what does not.

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