This post is written by Ian Taylor, Researcher and Policy Associate, University of Oxford

  • The problem: Responsible business is a huge opportunity for societies, but it is not simple or risk free.
  • Why it matters: The risks involved are real and subtle but the gains to communities are sorely needed.
  • The solution: A frank and informed conversation is required to manage the risks and realise the opportunities.

Increasingly, companies are expected to account for a range of social and environmental issues. Dr. Dambisa Moyo, an economist who sits on the boards of firms like Chevron and 3M, has written that ‘this sort of responsibility is rapidly becoming a central part of the board’s duties, expanding its role beyond simply minding the financial bottom line and towards embracing good corporate citizenship efforts in areas such as education and health’.

In her new book How Boards Work, Dr. Moyo goes on to state that a 2019 statement from the Business Roundtable, a club of American corporate CEOs, ‘effectively ended adherence to the old philosophy of shareholder primacy’ famously advanced by Milton Friedman in the 1970s. But how should we feel about this change in the role of business and what is the appropriate reaction from government?

The case for responsibility

The British Academy has called responsible business ‘one of the most important and pressing topics of our time’. But even defining responsible business can cause people to scratch their heads, as it encompasses overlapping concepts such as corporate social responsibility (CSR), environmental, social and governance (ESG), responsible business conduct (RBC), as well as sustainability. At its core it is about businesses ensuring that their activities benefit society instead of damaging society. Increasing demand from investors and customers, combined with the increasing complexity of taxing companies, make responsible business an alluring concept. But feelings about it are surprisingly mixed.

One of the leading voices expressing caution is Karthik Ramanna, Professor of Business and Public Policy at the Blavatnik School of Government and two-time winner of a prize that the _Financial Times _has dubbed “the business school Oscars”. Posing some questions to Professor Ramanna on the topic is revealing.

Why do you think it is important for a school of government to examine the implications of increased enthusiasm for responsible business in society?

I worry that “responsible business” is a marketing catchphrase, designed by corporate PR experts to be both unassailable and empty: who can be against “responsible business,” but what does that term even mean? For some, business is responsible when it mitigates its GHG [greenhouse gas] impact; for others, business is responsible when it is creating local jobs; for still others, it is responsible when it is earning a rich return on invested capital. The hard reality is that most businesses cannot do all of these things at once – what makes business-management hard (and interesting) is that it involves trade-offs over time across different demands on businesses.

Why does this all matter to a school of government? Because it is government’s role (together with that of civil society) to provide checks and balances on business power. And, if some businesses are pulling wool over citizens’ eyes by clever rhetoric whilst still engaging in anti-social activities, then governments must step in.

__How much risk do you think there is for governments around the world in handling the development of responsible business? __

In the end, government, like business, doesn’t have all the answers; but it has one thing that businesses do not – the police power of the state. That means governments should be very careful not to overreact, and, to me, a good government is one that is acutely aware of its knowledge limitations and disproportionate power and thereby acts with attendant prudence.

It’s sobering stuff. But the opportunity presented by society’s broader expectations of business is not one we can afford to ignore. The momentum of commitments like the nearly 14,000 businesses that have signed up to the UN’s Global Compact should be captured. So how can we seize the opportunities?

Tax could be a very significant area of focus for responsible business in the future, as countries around the world look to shore up government budgets after the shocks of COVID-19. The Build Back Better with Business report, published by the Blavatnik School and authored by Ngaire Woods and Richard Collier-Keywood, identifies a major role for company boards to play in ‘fostering a responsible tax culture for business’. The authors suggest that businesses should be proud of the contribution they make to society through tax. Dr. Moyo is optimistic about the positive role that boards can play. She has advocated for ethical committees on boards to make decisions on how to balance the complex elements involved in doing good.

At the request of a UK government department, the Government Outcomes Lab (GO Lab) at the Blavatnik School of Government conducted research on the history of responsible business, and published the report Responsible Business: A Challenging Opportunity.

A public talk, entitled ‘Politicians in the board room? How government should handle responsible business’, closes the packed schedule for the GO Lab’s Social Outcomes Conference on September 9th and 10th, which also features a keynote address by Nobel Prize winning economist Joseph Stiglitz. Those with an interest in improving social outcomes are encouraged to register, either as a virtual participant or an in-person delegate at the Blavatnik School in Oxford, and come ready to contribute to what is anticipated to be an insightful dialogue. — __Ian Taylor __

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