Perspectives

The Missing Link in Corporate Responsibility

Connecting for Sustainable Growth

By Professor Dr. Linda O’Riordan, Nina Marsh and Professor Dr. Jan Jonker

The fallout from the global economic crisis and other ‘events’ have re-intensified the spotlight on the role of business in society, leading to a growing emphasis on Corporate Responsibility1 (CR) and Sustainable Development (SD). This has led to a swarm of commercial responsibility and sustainable responses (such as reporting initiatives, eco-labels and organisational initiatives) which indicate a modest start in the pursuit of improved efficiency in the use of commodities and resources to create economic wealth.

In the collective quest for integrating sustainable CR and SD solutions to address some of the key challenges of our time in the economic, social and environmental sphere, recent ‘events’ (such as the global financial crisis, continuing poverty and human rights issues, as well as climate concerns) raise the question: where did we get lost? In hindsight, it appears as if the ‘clockwork of society’ has become split into an almost infinite number of fragmented domains acting without sense, synergy or connection.

Central to the predicament inherent in the on-going debate on CR and SD is a growing awareness that something is ‘missing’ in the approach in which our institutions and citizens produce and consume products and services. This implies that as a society, we might be currently functioning in a vacuum due to a profound ‘disconnection’ between our economic system (including by definition our business strategies and models) and our social system (driven by a sense of responsibility as human beings). This is the ‘missing link’ we elaborate in this article.

(1) Separation of ownership and responsibility comprises the mental construct in which companies have almost exclusively pursued the interests of their shareholders which has driven managerial capitalism through the 20th century and still remains the prevailing narrative of business today. It establishes the sustaining mechanism for the next component.

 

(2) Emphasis on the monetary transaction value determines that money has come to be perceived as the most rational method to measure value and value creation. Accordingly, virtually all business activity is conducted and its value calculated via a straightforward cost - turnover equation. As a result, money is the key transaction value used to estimate profit and loss on business and societal balance sheets. This has led to what could be considered an obscure perception of how resources are valued in the corporate conversion process on monetary and social markets. Consequently, it appears as if markets with an emphasis on money seem to disregard the fact that there is much more to life than what gets measured in financial accounts.

 

(3) Lack of transparency addresses how variables (things), nature and people are systemically linked. A fundamental tragedy of our time is the lack of sufficiently reliable, accessible/user-friendly, actionable data for those attempting to recognise and address missing link issues. As a result, because we no longer understand or feel how we as human beings are connected to the system, we cannot ‘see’ the connections. This results in behavior which often takes place in a ‘vacuum’ and is disconnected from what matters. So lack of connectivity and lack of transparency function like a pair (negatively) reinforcing each other.

The missing link has three key components. These include: (1) Separation of ownership and responsibility, (2) Emphasis on monetary transaction value and (3) Lack of transparency.

The consequence of these observations is that individual actions are not connected to - and do not have an impact on - what matters collectively. The three ‘missing link’ inconsistencies elaborated above imply a profound ‘disconnection’ between our economic and our social system. The lack of basic connection between people and an operational ‘sense of responsibility’ calls for measures and effective mechanisms within the system which enable those connections that prove critical to our collective well-being.

 

Exploring a way forward

To address these challenges, the quest for identifying and developing more effective ways of regulating the use of common resources without resorting to either private property rights or government intervention is a task that stands central in debates aiming at connecting the dots. This urges a revision of our social contract to take into account the ecological and natural ‘rights and duties’ of those who have a voice and those who do not (such as animals, plants, and trees).

Essentially, this article asserts that a key aspect in the “missing link” solution is the need for individuals in society to ‘feel’ responsible, encouraged, and inspired to address the sustainability challenges which we collectively face. Ultimately, such a transformation could potentially lead to more effective (business) solutions, which could in turn enhance the creation of welfare for human beings and nature, and thereby achieve a fairer distribution of the wealth generated by the corporate conversion process. This could involve stronger collaborations between governments, the private sector and non-profit organisations to enable, encourage and activate the many instances of positive energy inherent at the ‘grass-root’ level of ‘ordinary’ society. This calls for a new generation of (business) strategies and business models enabling the use of various transaction values.

In the quest for new solutions the responsibility rationale is simple: if we as the human beings on this planet who have everything to lose from the devastating developments of our time do not employ our resources to recognise and respond to these challenges, how else are they going to do be addressed and over time resolved?

To elaborate the subject further, please click this link.

The FOM University of Applied Sciences and the Springer Gabler Publishing House will shortly be publishing a new book of scientific papers entitled “Corporate Social Responsibility? - Locating the Missing Link: New Perspectives on Sustainable Management Solutions”. Taking the challenges highlighted above as its starting point, this book will address how to manage the newly evolving and highly elusive topic of developing and implementing sustainable CSR strategies for business.

1Although CSR (Corporate Social Responsibility) is typically the most common label employed in Europe, in this article the word ‘social’ has been deliberately omitted from this term in order to reflect the fact that not only social, but also ecological, moral, financial and other key responsibilities are implied in this acronym of which ‘social’ matters are merely one (albeit highly salient) component.

Prof. Dr. Linda O’Riordan is a Director of the KompetenzCentrum for Corporate Social Responsibility (KCC) at the FOM University of Applied Sciences. Dr. O’Riordan teaches mainly MBA students in the subjects: Business Strategy, Management Consulting and Problem Solving, Intercultural Compentence, as well as Marketing and Customer Relationship Management. Additionally, she is a lecturer at the University of Applied Sciences (Hochschule für Oekonomie & Management gemeinnützige GmbH) and Heinrich-Heine University in Düsseldorf.

Nina Marsh graduated from FOM University in 2013, where she received an MBA with distinction for her thesis ‚Investment Behaviour and CSR: Utilising Existing Mind-Sets to leverage Sustainable Business’. In addition to her work in the public sector, Nina was appointed to become a research fellow at the KCC at FOM University in 2012. Since January 2013 she is involved in a European research project on ‚New Business Models’ initiated by Prof. Jan Jonker of the Nijmegen School of Management in which the FOM University is one of the participating institutions.

Prof. Dr. Jan Jonker is employed as a professor at the Nijmegen School of Management (NSM) at the Radboud University Nijmegen (RU – Holland) where he holds the chair of ‘Sustainable Entrepreneurship’. Professor Jonker’s research interests are at the crossroads of management, corporate social responsibility (CSR) and sustainable development (SD), specifically, the development of organisational concepts, strategies and (new) business models. Thus far, he has written and co-written 25 books and published over 150 articles. He has delivered many public lectures and acted as a visiting professor all around the globe.

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