“It is more critical than ever that businesses in the 21st century are focused on generating long-term value for all stakeholders and addressing the challenges we face, which will result in shared prosperity and sustainability for both business and society.”
This quote from Darren Walker, president of the Ford Foundation, sums up the views of the 181 CEOs who signed the 2019 Business Roundtable Statement on the Purpose of a Corporation. While corporate sustainability reports, climate commitments and DEI statements are commonplace today, companies’ commitment to lead for the benefit of all stakeholders (including employees, suppliers, the environment and local communities) is a newer development, representing a steep departure from the prevailing views in previous decades. In 1970, economist Milton Friedman famously published a piece in The New York Times titled “The Social Responsibility of a Business Is to Increase Its Profits.” His doctrine, encouraging corporations to focus solely on generating shareholder value, catapulted business into an era of short-term profit-driven decision-making, which has come to an end post-2020. Or has it?
What does justice mean for business?
The term “justice” can provoke many connecting concepts in our minds, including ideas surrounding fairness, equality, ethical standards, equity, legitimacy, and the rule of law. For business, “just” practices are extremely important because the actions within industries have sprawling effects on society. Fairness and equity are key in internal and external relations with employees, producers, consumers and the environment. Focusing on justice within the workplace will allow for the transfer of these values to the greater community.
It is no surprise that corporate commitments to stakeholder justice have peaked in a time of rampant health inequity following the COVID-19 pandemic, historic social demonstrations in support of the Black Lives Matter and #MeToo movements, and heightened climate anxiety as experts warn about the consequences of environmental degradation. While businesses have typically resisted entanglements with social issues in the past, these issues are becoming more and more difficult for them to avoid commenting on, especially as 76% of consumers will refuse to purchase a company’s products if the company supports an issue contrary to their core beliefs.
More and more businesses are sharing an increased focus on justice with their stakeholders. However, some companies are committing to higher ethical standards without a clear profit incentive, while others are doing so for the sake of profitability and public image. Companies’ interpretations and applications of justice differ across industries, depending on the company’s goals and motives.
Three types of justice
From our review, businesses typically appear to be concerned with three types of justice: social justice (providing equal opportunities to people of all races, genders and religions), environmental justice (addressing the unfair exposure of marginalized communities to harms from environmental problems such as air and water pollution) and distributive justice (ensuring an equitable allocation of benefits and burdens in society).
1. Social justice
Businesses are promoting and partaking in efforts supporting diversity, equity and inclusion, or DEI (sometimes known as EDI). In particular, consulting firms are using techniques such as goal setting, model creation, and the measurement of appropriate metrics to collect data on DEI.
Racial equity policies may focus on improving representation rates, implementing anti-racism training, and enacting blind resume screening to eliminate biases in hiring. For gender equity, metrics include equal pay, corporate advancement rates, and benefits during pregnancy and motherhood. While many firms have committed to racial and gender equity in public-facing reports, there is still a long way to go. As of 2022, it was more common to find a CEO named James than a CEO who was a woman, as women make up only 6.4% of the Fortune 500 CEOs.
Furthermore, the business landscape has seen increased levels of corporate political activism in recent years. As a response to social unrest from proliferating inequalities, businesses are getting involved in human rights campaigns such as the Black Lives Matter and #MeToo movements. These movements have prompted corporate activism in the forms of posting of educational resources on social media (though it is unclear whether these digital efforts make a tangible impact), and boycotting certain industries or celebrities with unsavory reputations. For example, following Kanye West’s antisemitic outbursts in 2022, companies such as Balenciaga and Adidas cut ties with him to disavow the rapper’s inappropriate behavior.
2. Environmental justice
At a time when extreme weather, rising seas, and damaged ecosystems could threaten the lives of billions of people, it is becoming increasingly vital for businesses to make a commitment to aiding climate change. However, it is difficult to tell when a company is making genuine strides. For example, Exxon’s $6.6M contribution to environmental conservation causes may be viewed as disingenuous when the company also gives approximately $11M to groups that discredit climate change. For this reason, audit and accounting firm EY recommends that companies align their environmental strategy with UN Global Compact environmental principles and integrate environmental considerations into business decisions.
Corporations’ direct effects on the environment often stem from their supply chains. These networks of individuals, resources and technologies that go into creating and selling products are ripe for sustainable improvements. Environmentally-conscious improvements in the supply chain are especially important since Scope 3 emissions (indirect emissions in the broader value chain) make up around 75% of oil and gas companies’ climate pollution. Consulting firms are helping businesses reach their justice-oriented goals across the supply chain through improving technology, data collection and transparency. Corporations that create a transparent relationship between their supply chain and the public are taking steps in the right direction toward environmental justice.
Furthermore, there has been a historical health burden placed on poor and marginalized communities as companies externalize the cost of doing business onto them. These communities experience the immediate consequences of the climate crisis, leading to negative health outcomes and social unrest. Ivey’s Network for Business Sustainability (NBS) recommends engaging with marginalized communities in consultation and giving local grassroots organizations decision-making power when building infrastructure.
3. Distributive justice
The definition of justice varies across sectors, and so do the ways businesses act on distributive justice. Their practices can be categorized as external or internal. External practices involve investing in foundations, charities and local communities, such as Apple’s Racial Equity and Justice Initiative. An example of an internal practice is Patagonia’s founder transferring 98% of the company’s ownership to a nonprofit called the Holdfast Collective, which will distribute the wealth to various grassroots organizations in the future.
We are living in a divisive century wherein the richest 1% have accumulated wealth worth over $222 trillion, almost half of the world’s total money supply. Many commentators have argued that corporate philanthropy alone is insufficient in repairing the damage inflicted by years of pursuing profits at the expense of long-term societal health. Thus, it has been argued that the private sector should play a more “activist” role in advancing equal opportunity for all to meet public expectations.
Weaknesses and gaps
In our search of justice practices across corporations, a few patterns emerged and are worth noting. For business, goal setting does not necessarily translate into action, especially when goals are broad and lack specifics. One inhibitor to environmental justice improvements is an increase in “greenwashing”, or the misrepresentation of products and services as being more sustainable or eco-friendly than they truly are. Such deceptive marketing is provoking consumers to make decisions that appear to be positive for the environment but that, in reality, are not. Corporations that greenwash fail to uphold a promise to consumers, and they may draw attention away from genuinely beneficial products and services.
Additionally, the global sustainability landscape is still quite fragmented, as each country’s approach to dealing with social and environmental issues is individualized. The year 2023 marks the halfway point in implementing the 2030 United Nations Sustainable Development Goals (SDGs), yet crises such as COVID-19 have posed new challenges to cooperation and have exacerbated inequalities. These factors may make the SDGs difficult to achieve by 2030.
Lastly, companies address justice-related concepts through environmental, social and governance (ESG) reports and teams, which often depend on lagging sustainability regulation. Consulting companies in particular publish frequent reports on how companies integrate ESG into board oversight responsibilities. Within these reports, companies commonly highlight the SDGs that they prioritize. While some companies support the overall commitment of the SDGs, others only tell their stakeholders about the specific goals they are prioritizing. Deloitte, for example, is aligning itself with SDGs 4 (quality education), 5 (gender equality), 8 (decent work and economic growth) and 10 (reduced inequalities). However, internal teams struggle to standardize these reporting methods, as there is still a severe gap in data quality, reporting regulation, and financial resources devoted to sustainability teams.
The way forward
The intersection of business and justice is evolving but still murky in the 21st century. More and more companies produce DEI reports, facilitate dialogue, create supplier codes of conduct, host in-house workshops, conduct impact assessments, and develop written codes of ethics than ever before. Yet, simultaneously, the business landscape is riddled with unethical practices such as greenwashing, environmental pollution, and the stifling of employee rights.
In the future, we predict a rise in greenwashing to continue until proper enforcement mechanisms are set. In June of 2023, the International Sustainability Standards Board (ISSB) published its global sustainability guidelines, which has the potential to improve disclosures over time. However, these guidelines alone will not necessarily address all of the reporting shortcomings. The adoption of these guidelines will likely be slow and complicated as corporations grapple with how to effectively measure and communicate their commitments to various stakeholder groups.
Best practices for integrating justice within business practices include leading with transparency and committing to upholding high ethical standards, even if these actions put the company’s bottom line at risk. If companies want to truly integrate justice, it is also necessary to embrace regulatory developments, specify granular net-zero goals, and eliminate hypocrisy when it comes to climate commitments and fossil fuel investment. To avoid greenwashing, focus more on improving the product itself rather than improving the perception of sourcing strategies. Ultimately, accept criticism of your business; people are right to be cynical about the intentions of the private sector after years of corporate scandals and fraudulent behavior. The way forward will be messy and complicated, but leading with genuine integrity will help your business and society in the long run.
About the Research
The Erb Institute at the University of Michigan and the Centre for Building Sustainable Value at Ivey Business School are working to create a socially and environmentally sustainable world by harnessing the power of business. The authors are working as research assistants supporting Professors Sara Soderstrom (Michigan) and Wren Montgomery (Ivey) on a joint project seeking to review and expand research and practitioner engagement at the crucial intersection of justice and sustainability. Drawing on their review of 110 popular press articles, journals and other sources, the authors have created this primer on how the business sector already is taking action, as well as how businesses can better integrate justice into their sustainability efforts.
About the Authors
Firuza Huseynova is a student at Ivey Business School, pursuing a dual degree with PPE (Politics, Philosophy and Economics) and Business, with a Certificate in Sustainability. She is interested in understanding how businesses can make more structurally ethical decisions that benefit society in the long run.
Stephanie Snover is a student at the University of Michigan studying Environmental Science. She will attend Georgetown Law School in the fall in hopes of pursuing a career in Environmental Law to work toward creating a more just and sustainable society.
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