The failure of externalities

Professor Aneel Karnani’s article, The Case Against Corporate Social Responsibility (Wall Street Journal, August 23rd, 2010), stirred up a lot of discussion in the CSR community, to which Professor Karnani responded in an email posted on Elaine Cohen’s excellent blog,

I thought it was most revealing that Professor Karnani refers to “externalities” such as pollution as a market failure.  The real failure is that our “capitalistic” market economy does not include the direct environmental cost (or social cost, for that matter) of industry in its accounting, thus allowing the conflict between private profit interests and public interests to arise.

All of the direct costs of business and industry, whether it’s a labour or materials cost, an emissions control cost, or other, should be internalized; this is the ‘responsibility’ part of CSR.  A company should not be able to generate profit by transferring a cost burden to a third party.  Through licencing and other regulatory mechanisms, companies acquire the privilege of exploiting a public natural resource.  Over time, our society has allowed industry to act as if such permissions also grant an implicit right to pollute (or otherwise transfer costs out of their profit equation).  Corporate responsibility is necessary, in part, to remind all stakeholders that the onus is and should be on the polluter to pay.

The private interest profit motive will be aligned with public interests of environmental and social health when such “externalities” are seen for what they are: internal costs of doing business.

The convergence of social media and corporate responsibility

In the early 1400s, Johannes Gutenberg invented a mechanical movable-type printing process that enabled the first mass production of books.  Within decades, the technology had spread across Europe, and the growing availability and affordability of the printed word revolutionized society.  The flow of information and ideas fuelled the Reformation and the French Revolution, broke down strongholds of power, whether political or religious, and contributed to the democratization not only of societies but of knowledge itself.

Over time, we’ve witnessed the emergence of mass media, designed and used to broadcast information from and by a small group to a large one.  This communications audience is, essentially, a mass society of undifferentiated individuals.  It receives information.

However, social media turns a receptive mass society into a creative public.  Information doesn’t just flow from a small group to a large one, and information creation isn’t just the purview of the powerful elite anymore.  The trickling democratization of knowledge that began with the Gutenberg press, social media is making a flood.

Now, humans have always been social creatures.  It’s not social networking that’s new.  Rather, it’s the development of new technologies at a time of rapid globalization and increasing awareness of humanity’s impact on the Earth that have converged to create the perfect storm of new social media. Read the whole post here


I created this blog because what I have to say about corporate responsibility can’t all be said in 140 characters…

Actually, I created this blog for a few reasons.

Much of my work is in the area of corporate responsibility and business sustainability.  Although we as a society have come a long way in this space, there is still much to be learned and much to be done.   This blog aims to engage and support those who would further the art and science of corporate responsibility and business sustainability, whether as a practitioner, a consumer, or any other kind of interested party.

But I am frequently reminded, especially as I read and watch the daily news, that corporate responsibility and business sustainability requires a broader contextual frame.  There are matters of public and personal responsibility that are relevant to, and must also be considered in, deliberations of corporate responsibility.  So this blog will also explore this broader context, to help make sense of corporate responsibility and related topics, like sustainability and ethics.

Finally, this blog was inspired by real people whom I call Shoestring Practitioners.  A Shoestring Practitioner is someone with a passion for doing good, for doing the right thing, for doing things better, but who is working on a shoestring:  constrained in his or her efforts by a lack of resources, such as staff, time, money, or organizational support.  I know quite a few Shoestring Practitioners.  Sometimes they make incredible progress.  Too often they are pushing a rope (or, if they don’t have a rope, a shoestring).  The Great Recession made things even more challenging for the Shoestring Practitioner.  They need all the help they can get.  I hope this blog will serve as a useful resource for them.

I’ll try to address any specific requests for information or guidance that Shoestring Practitioners (or any other kind of reader) might have.  To begin with, I’ve added a series of links to resources I find most useful.  I’ll add to and refine these links as time goes on, and discuss additional resources in new posts.

You’ll find that my content will emphasize, but not be limited to, the Canadian scene.

Depending on how things go – how the blog is received and what kind of feedback I get on the content – I may eventually re-organize the blog content to better meet user needs.

Let me know what you think and what your responsibility challenges are.  Feedback is always welcome.

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