Sustainable Development: From Brundtland to Corporate Responsibility
Brundtland Commission (1987)
- Also known as the World Commission on Environment and Development.
- Chairperson: Gro Harlem Brundtland, appointed by the UN in 1983.
- The UN General Assembly was concerned about the deterioration of the environment and natural resources.
- The Commission released Our Common Future.
- This document popularized the term “Sustainable Development”.
Brundtland Report
The 1987 Brundtland report, Our Common Future, helped define sustainable development. In 1983, UN Secretary-General Javier Pérez de Cuéllar asked Prime Minister Gro Harlem Brundtland of Norway to create an organization independent of the UN to focus on environmental and developmental problems and solutions. The World Commission on Environment and Development, known as the Brundtland Commission, was formed. The commission’s report highlighted how growth rates in both developing and industrialized nations would prove to be unsustainable.
Sustainable Development
Humanity can make development sustainable to meet the needs of the present without compromising future generations. Sustainable development requires meeting basic needs and extending opportunities for a better life. Poverty is a major obstacle to sustainability. Technology and social organization can be improved to foster economic growth.
Circular Economy
A circular economy is restorative and regenerative by design. Economic activity builds and rebuilds overall system health. It works effectively at all scales for businesses, organizations, and individuals, globally and locally. It is based on three principles:
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems
Sustainable Design and Eco Design
Sustainable design considers environmental, social, and economic impacts from the initial phase through to the end of life. Eco Design is a core tool for the Circular Economy. It is estimated that over 80% of product-related environmental impacts are determined during the design phase. Eco design aims at reducing the environmental impact of products, including energy consumption throughout their entire life cycle.
Eco Design Examples
- Dematerialization: Optimize material and energy use.
- Disassembly: Design for easy recycling.
- Recyclability: Use mono-materials or bio-materials.
- Durability: Extend product lifespan.
- Multi-functionality: Design for reuse and recycling.
- Design of services: Replace products with services.
- Reduction of emissions: Create new forms of production with open industrial cycles.
- Eco publicity: Integrate sustainability messages into product design.
Institutional Theory
Institutions comprise regulative, normative, and cultural cognitive elements, providing stability and meaning to social life. These elements contribute to a powerful social framework. Organizations need social acceptability and credibility, not just material resources and technical information. Legitimacy is the perception that an entity’s actions are desirable.
John Elkington Triple Bottom Line
TBL measures the financial, social, and environmental performance of a corporation. A company producing a TBL accounts for the full cost of doing business, encouraging the management of economic, social, and environmental value. Externalities are costs or benefits imposed on others not reflected in prices.
Historical Background and Theories
- Corporate responsibility began with the industrial revolution.
- Adam Smith discussed business with morality.
- Richard and George Cadbury (1850) practiced social responsibility.
- USA Philanthropic Donations to Harvard, Yale, Columbia from oil tycoons.
- 1929 Crisis: Debate on responsibilities of directors: shareholders vs community.
- CSR Concept (Bowen, 1953): Obligations of employers in desirable policies and actions.
- Corporate Citizenship (1957): Recognition of the corporation’s social and economic responsibility.
- 1950s Quakers: Investment policies excluding tobacco, alcohol, and gambling.
- 1960s-70s: Development of CSR.
- 1980s: Neoliberalism slowed CSR.
- 1990s: Resurgence due to business scandals and environmental concerns.
- 2000s: CSR consolidated in companies.
Different Views on CSR
- Friedman, Milton (1970): “The social responsibility of business is to increase its profits”.
- Carroll, A. B. (1991): The pyramid of corporate social responsibility.
- Freeman, R. E. (2001): A stakeholder theory of the modern corporation.
- Porter, M.E and Mark R. Kramer (2011): “Creating Shared Value”.
Who was Milton Friedman?
1976 Nobel laureate; Professor at the University of Chicago. Founder of the Chicago School of Economics. “The social responsibility of entrepreneurs is to increase their profits.” “Those who should be responsible are people, not an artificial corporation.”
Friedman – Can a corporation have social responsibilities?
Only human beings have moral responsibility. It is the manager’s responsibility to act solely in the interests of shareholders. Social issues are the province of the state, not corporate managers. A corporation is an artificial person with artificial responsibilities. Businessmen are individual proprietors or corporate executives. In a free-enterprise system, a corporate executive is an employee of the owners. The responsibility of companies should be to the human being, not to maximize profit. Managers can do charity with company money. Companies are not ready to face new social issues.
Carroll’s Pyramid
Philanthropic responsibilities: Be a good corporate citizen. Ethical Responsibilities: Be ethical. Legal responsibilities: Obey the law. Economic responsibilities: Be profitable.
Stakeholder theory of modern corporation
An individual or group harmed by or benefiting from the corporation, or whose rights the corporation should respect. Internal and external stakeholders are important.
Porter – Creating shared value
Policies and practices that enhance competitiveness while advancing economic and social conditions. Ways to create shared value: Reconceiving products and markets, redefining productivity, and building supportive industry clusters.
What is CSR?
A big opportunity for becoming a better company, updating the company to compete, creating value and social capital, fostering development, and vertebrating society. It is not a fashion, a management tool, social marketing, social action, or philanthropy.
Definition: Social responsibility is the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that contributes to sustainable development, takes into account stakeholder expectations, and complies with applicable law.
CSR Debate
Arguments for CSR: Ensures a stable environment, meets societal expectations, is an ethical obligation, promotes public image, and increases reputational value. Arguments against CSR: Reduces profit maximization, diversifies efforts, transfers costs, increases company power, and companies lack capacity to address social issues.
Link to intangible assets
Integrated management of intangible assets introduces a multi-stakeholder and long-term vision. Corporate Reputation: Collective representation of past actions and results that describe the company’s ability to achieve valuable results for multiple stakeholders. Managing intangible assets links what makes you unique, what you are good at, and what society needs.
Global Compact
The UN Global Compact aims to mobilize a global movement of sustainable companies and stakeholders. It supports companies to do business responsibly by aligning strategies with Ten Principles on human rights, labor, environment, and anti-corruption, and to take strategic actions to advance societal goals, such as the UN Sustainable Development Goals.
Goals for sustainable development
The SDGs guide countries in tackling challenges, including ending poverty and hunger, protecting the planet, and ensuring prosperous lives. The SDGs are broader than the MDGs, relevant to all countries, and emphasize the interlinkages between social, economic, and environmental dimensions. SDGs will be monitored and reviewed using global and national indicators. The SDGs are not legally binding.
Spanish (EU) Law 11/18 on nonfinancial information and diversity
Content: Environmental, social, personnel, human rights, and anti-corruption issues. Scope: Companies with over 500 employees that are public interest entities or meet certain financial criteria. Why the change? ISO 26000 is the international standard to help organizations address social responsibilities.