Building Sustainable Value Through Fiscal and Social Responsibility

Subtle misdemeanors that are not illegal but rather blur the line between right and wrong can cause serious damage to corporations as they are both widespread and widely accepted. This author argues that over the long run it is the pursuit of both societal and economic value that yields long term and stable profits. The article highlights the economic value versus the societal value argument. While institutional structures in most capitalist countries reinforce the economic argument, economic arguments erroneously assume the existence of perfectly competitive markets. However, because the perfect market is an abstraction, negative externalities impact those who have had no role in, nor consented to the economic transaction. On the other hand, focusing exclusively on societal value yields extremely high short term costs and is likely to lead to closure when profits are persistently negative. The author argues that the either-or approach in the debate between economics and ethics has polarized the discussion and distracted attention from the space where economics and ethics converge and where potential solutions exist. Business should, like some have in the past, focus on building sustainable value. To do so, businesses should focus on the long term and invest in social processes, thus building greater resilience to changes in the market place while addressing social issues throughout the organization. The article also chronicles the advantages of active and up-front stakeholder engagement, community participation and involvement, and strategic decision making by using examples of social processes in companies such as Tembec Inc, Home Depot Canada and TransCanada Pipelines.