Markets & Justice

Markets & Justice
Freely operating markets yield a just outcome?

White Australia Has A Black History

White Australia Has A Black History

Monday, 23 November 2015

Business should move beyond "bleating for corporate tax cuts" : Shared value and business ethics

 The article published below if the Editorial published in The Age of 23 November 2015.
Emphases and font changes and links below have been made by The Editor of Advocacy.

Private enterprises are the driving force of our economy; thus they have a fundamental role in our society and polity. One of the greatest forms of social justice, for example, is employment, and the greatest generator of jobs is business. Australia facilitates the benefits of business by allowing market forces to operate relatively unfettered beyond legal protections for consumers, staff, suppliers and the environment.

The heft of enterprises is clear, but the understanding of the role of business is not static. While the balance of rights and responsibilities between capital and labour remains debated, the predominance of ideological battles has been replaced by a comprehension of overlapping interests. So much of Australia's capital, for instance, is now owned by labour through what has become one of the biggest retirement savings pools in the world.

During at least the past quarter of a century, there has been a welcome, crucial shift from the notion that big businesses have but one responsibility – to maximise profits and therefore returns to shareholders. That blinkered approach has given way to what has been referred to in this newspaper for several years as enlightened self-interest, which can be encapsulated in the idea that there can be no prosperous high streets without healthy backstreets.

This notion has evolved from the 1980s incarnation known as "ecologically sustainable growth" to "sustainable development", to "corporate social responsibility". In recent years, the term "shared value" has emerged, becoming globally prominent since 2011, when two high-profile thinkers, Michael Porter and Mark Kramer, published an article about it in the Harvard Business Review.

Shared value is defined as "policies and practices that enhance the competitiveness of companies while improving social and environmental conditions in the regions where they operate". In other words, it is about enlightened self-interest. It is not about traditional corporate social responsibility or philanthropy or supporting charities – transfers that still have a key role in the broader community.

This year in Australia, this evolution in thinking has been given impetus by the launch of the Shared Value Project, which has surveyed businesses and found an increasing readiness to embrace the opportunities to increase competitiveness and profitability precisely by capitalising on the potential and social and environmental benefits business can create.
An example is Coles' partnership with SecondBite, an organisation that provides many thousands of people with rescued fresh food that would otherwise have been dumped into landfill. Coles helps its own brand and attracts and retains some of the best staff in a competitive labour market because it has made this simple connection.

Malcolm Turnbull's ascendancy to the prime ministership has fuelled a mood for progress, and Australia is embarking on crucial, long-term tax reform. Shared value should become part of this and part of companies' DNA. It requires leadership from the top of business.

That does not mean boards and chief executives only. It means that the business lobby groups should move beyond their limited position of bleating for corporate tax cuts, which may indeed be part of a comprehensive tax-reform package. Such an evolution by these groups is in the long-term interests of businesses and the entire nation.

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Further reading:

 Business Ethics Journal Review: Creating shared value - the one trick pony approach by Thomas Beschorner. This article is a downloadable .pdf.
Overseas Development Institute: Post-2015 Milennium Development Goals: What role for business?
Harvard Business Review: Serving the world's poor profitably by C.K. Prahalad and Allen Hammond
California Management Review: Contesting the value of "Creating Shared Value".