Sustainable Corporate Responsibility

Abstract

In this chapter, I begin by reflecting on the origins and historical context of terms related to sustainability and business, including but not limited to Corporate Social Responsibility (CSR), Corporate Citizenship, and so on. I discuss what they mean, their purpose and limitations. I explore different, multilateral initiatives and frameworks pertaining to sustainability, in particular ones adopted by UN member states and how these apply to businesses. The role of corporate involvement and contribution, moving from a reactive to proactive sustainability engagement, is addressed. The responsibility of corporations from a philosophical perspective including key ethical schools of thoughts is also addressed.

In this chapter, I start by reflecting on the origins of terms related to sustainability and what they actually mean. I will explore their historical context and about different, multilateral frameworks pertaining to sustainability, in particular ones adopted by UN member states. The responsibility of corporations from a philosophical perspective including key ethical schools of thoughts will also be addressed.

2.1 The Corporation

To incorporate is to combine into one “body”. It has to do with entities, like individuals, joining forces for a common business goal. It is easier to realize a goal together than alone. Corporations have been established for hundreds of years. However, it is only during the last decades that we have seen a substantial growth in their number and size. This is a direct consequence of industrialization, moving from an agricultural society to an economy dominated by mechanized production and services. This transition has also led to the need for laws to regulate corporations.

In today’s society, large corporations play a major role. Measured in revenues, five of the world’s largest economies are corporations: Walmart, State Grid, Sinopec Group, China National Petroleum, and Royal Dutch Shell. Their revenues exceed that of Mexico, Sweden, Russia, and Belgium together (Global Justice Now, 2018). This power in the world economy also carries great responsibility.

Corporations have many of the same rights and requirements as individuals. They own assets, pay taxes, take loans, and generate profits and losses. However, there is one major difference between corporations and individuals; the fact that corporations have limited liability. Whereas individuals are personally responsible for actions they take, those who invest in a company are only liable for the amount they invested. When the capital is gone, so are their responsibilities. Companies cannot pay for any damages done in the past, when the company is bankrupt or ceases to exist.

Corporations are usually established by individuals, who as shareholders pursue business endeavors that they themselves could not have started alone. For corporations in general, the goal is to engage in activities that are beneficial for its investors in order to generate profit. Sustainability is not necessarily aligned with this goal. This is where regulations enter into the picture. Governments regulate corporations to ensure that profit is generated without inflicting excessive damage to our society and planet. Corporations have a responsibility to abide by laws and regulations. Still, most regulatory regimes do not provide a framework resulting in sustainable development and many of the goals and targets for improved performance are not implemented.

2.2 Limits to Growth: From an Environmental Perspective

Prior to the Industrial Revolution, there was only about one million people on the planet and most of them were farmers. On a planet with a small population with low consumption and hardly any waste, “sustainable development” was a non-issue. In the 1970s, the global population nearly tripled and for people in the industrialized world, consumption had increased tremendously—mainly based on products manufactured by corporations. This resulted in substantial environmental damage as well as many societal challenges. In this context, realizing the limits of our planet, the relevance and focus on sustainable development merged.

Discussions about the degree of our planet’s limitations have been ongoing for several centuries, but mainly from the consideration of scarcity. Already in the 1800s, Thomas R. Malthus claimed that there would be ceaseless resource and food shortages. His argument was that as soon as food production increased, the population would grow and the food surplus would be consumed, eventually leading to famine. This had also been the fact for much of history.

However, the Industrial Revolution was taking place in the same period and the move to factory production changed this situation for at least in the short run. People living in the part of the world engaged in the industrialization process became rich, while those in the non-industrialized part of the world also experienced changes, but mostly the negative consequences.

Books like Silent Spring by Rachel Carson, published in 1962, also drew attention to the negative impact of industrialization and its damaging effects on the planet. She was especially concerned about products attempting to control nature, for example, pesticides like DDT, which had long-term ecological impacts. She argued that such insidious products would lead to the extinction of key “actors” within the natural biological cycle, ultimately ruining the basis for our society, resulting in a silent spring. Initially neither corporations nor regulators were aware of these potential long-term negative effects. Not understanding the full scope of the negative environmental impact of products made assessing business risk and regulating them especially challenging. Beginning in the 1970s, the focus on environmental concerns substantially increased.

It was in 1970 that the ecological footprint exceeded the Earth’s carrying capacity. In Fig. 2.1, the solid line illustrates the Earth’s capacity, whereas the dotted line illustrates the growth in consumption and the collective footprint of the global population.

Fig. 2.1

The growth in consumption relative to the planet capacity—Ecological Footprint

An Ecological Footprint is a “measure of how much area of biologically productive land and water an individual, population, or activity requires to produce all the resources it consumes and to absorb the waste it generates, using prevailing technology and resource management practices. The Ecological Footprint is usually measured in global hectares. Because trade is global, an individual or country’s Footprint includes land or sea from all over the world. Without further specification, Ecological Footprint generally refers to the Ecological Footprint of consumption. Ecological Footprint is often referred to in short form as Footprint.”¹

The book Limit to Growth published in 1972 is largely considered as the beginning of a new era with regards to awareness and focus on environmental challenges. Thereafter governments and eventually corporations became concerned and consequently many initiatives were launched to confront its associated challenges.

Environmental challenges moving from local pollution to global challenges called for an international approach. The United Nations (UN ) is one of the few international organizations, which eventually took on a leading role in addressing global environmental challenges. Still, the UN was established many years prior for different reasons. The following section provides an introduction to the UN and how it became a key actor in the pursuit of sustainable development.

Figure 2.2 provides a timeline for the key events since the launch of Limits to Growth.

Fig. 2.2

Timeline for key sustainability related events since 1970

2.3 The United Nations

The United Nations was established in 1945 after World War II initially as a forum to maintain peace and for resolving conflicts between countries. The global war was devastating in its aftermath. It incurred significant losses of life, estimated at more than 70 million people and major destruction of industrial production and public infrastructure resulting in negative economic consequences.

Recognizing that many social challenges are global, the United Nations was crucial to identify, collaborate, and develop solutions. In response to the challenges facing humanity, the United Nations (UN) Charter was signed in June 1945. Key elements in Article 1, the purpose of the UN, were in summary to maintain international peace and security, to develop friendly relations among nations, to achieve international cooperations, and to be a center for harmonizing these actions (United Nations, 1945). At the California Conference in 1945, the UN, an “international organization designed to end war and promote peace, justice and better living for all mankind” became a reality. The Universal Declaration of Human Rights (UDHR) was launched in 1948.

UN engagement has changed over time. Focus on issues such as ensuring human rights and avoiding of war, including the Cold War, nuclear weapons, de-colonialization, and so on, which have all received the most attention. From addressing these issues, the gravity shifted and other stakeholders, like non-governmental organizations (NGOs ) became involved. Amnesty International was for example established in 1961 and Human Rights Watch was established in 1978. These NGOs drew attention to how nations violated the UDHR and these allegations were later followed up by the UN.

From the 1970s, the UN became increasingly focused on world culture and environmental issues. It expanded its operations and today, the UN is a “family of organizations”. The International Monetary Fund (IMF ), the World Bank (WB ), Food and Agriculture Organization (FOA ), International Atomic Energy Agency (IAEA), International Maritime Organization (IMO), International Labor Organization (ILO ), World Health Organization (WHO) are some of the 15 independent organizations linked to the UN through cooperative agreements. Today, the UN is the world’s largest intergovernmental organization with 193 member nations.

In an international setting, agreements between countries through the UN are important measurements. However, many of these initiatives are not legally binding. Countries can sign up to UN principles, but cannot be fined if the principles are not fulfilled. Still, UN principles often form a basis for national laws in countries and many of these laws affect corporations. From the standpoint of sustainable development, the UN Sustainable Development Goals (SDGs ) launched in 2015 is the key contribution, which will be later addressed in Chap. 3. Next, important UN initiatives concerning social and environmental issues are introduced.

2.4 The Universal Declaration of Human Rights (UDHR) 1948

The Universal Declaration of Human Rights (UDHR) is not legally binding but establishes a set of norms for how countries shall operate. It is noteworthy that freedom of speech, religion, and civil rights were great challenges at the time the UDHR was proclaimed. These issues still are today, but, through the UDHR, at least countries have agreed upon a universal goal with regards to rights related to issues as race, color, sex, and so on. The key principle is stated in Article 1. “All humans being are born free and equal in dignity and rights” (United Nations, 1948).

So, why is the Human Rights declaration relevant for corporations? Several of the articles within the declaration are related to work and the rights of employees—even though the term “corporation” or “business” is not included in the declaration. For example, Article 23. “1. Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment” and 2. “Everyone, without any discrimination, has the right to equal pay for equal work.” Article 24 states that “Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay.” All these clauses concern corporations.

The working conditions in the sweatshop industry are not acceptable with regard to the UDHR. Today, for example, the garments industry represents 80 percent of Bangladesh’s total export earnings, and it is still quite typical for employees to work 80 hours per week (Menke, 2017). Sustainability challenges in the supply chain will be addressed in greater detail in Chap. 8.

Today many of the UDHR principles are not met. There are still more than 40 million people trapped in modern-day slavery, most working in corporations, or even more common, providing products and services to corporations. Slaves are at the bottom of the supply chain. This implies that everyone today might wear clothes or carry goods such as cellphones that have been manufactured using slave labor. In that sense, human rights issues are very relevant when it comes to a company’s operations and responsibility.

The UN, as an international organization supported by 193 nations, is the most important source of common goals for sustainable development, particularly with regard to human rights and the environment. Chapter 4 will focus on UN initiatives and agreements that pertain to corporations, such as the UN Global Compact (2000), the UN Millennium Goals (2000), and the UN Sustainable Development Goals (2015). These initiatives were all developed in cooperation with corporations. So, they provide a basis for agreements not only between nations, but also between corporations and governments.

2.5 United Nations and Sustainable Development: Our Common Future (1987)

Many of the environmental challenges the world is facing today are international in nature. CO₂ emissions in Europe and North America impact Africa and Asia by contributing for example to extreme weather cycles. Effects are felt whether or not a country is responsible for the emissions. This was a key driver for the first world conference on environmental challenges held in 1972, the UN Conference on the Human Environment—Stockholm Conference.

It was a turning point in the development of international environmental issues and politics. Problems associated with worldwide pollution of air, water, and oceans were acknowledged along with the need to address them at an international level.

A follow-up of this conference was the book Our Common Future, commonly referred to as the “Brundtland Report”, published in 1987 by the UN. The report was a result of the Brundtland Commission’s mandate by the UN General Assembly in 1983:

• “to propose long-term environmental strategies for achieving sustainable development by the year 2000 and beyond;

• to recommend ways concern for the environment may be translated into greater cooperation among developing countries and between countries at different stages of economic and social development and lead to the achievement of common and mutually supportive objectives that take account of the interrelationships between people, resources, environment, and development;

• to consider ways and means by which the international community can deal more effectively with environment concerns;

• to help define shared perceptions of long-term environmental issues and the appropriate efforts needed to deal successfully with the problems of protecting and enhancing the environment, a long-term agenda for action during the coming decades, and aspirational goals for the world community.” (World Commission on Environment and Development, 1987)

The concept of “Sustainable Development” was launched after the publication of this book, which gave it a concrete definition which everybody could relate to and apply. Even though the term is rather broad, it provides an inclusive indication, which eases the dialogue between different stakeholders.

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. (World Commission on Environment and Development, 1987, p. 41)

Figure 2.3 illustrates the growth in “Sustainable Development” attention in media.

Fig. 2.3

Search on “sustainable development”. Factiva database

The Brundtland Commission consisted of representatives from 21 nations from both developed and developing countries, politicians, civil servants, and environmental experts. It took about 900 days to write the report. Although corporations were not included in the commission, they were invited to contribute along with other stakeholders.

The role of transnational corporations (TNCs) and their responsibilities were repeatedly addressed in the report. This is an example of such a statement, “Transnational corporations have a special responsibility to smooth the path of industrialization in the nations in which they operate”. To illustrate their importance, the report pinpoints three to six of the largest translational corporations and control over 80 percent of trade in key agricultural and metals commodities such as tea, coffee, cocoa, cotton, forest products, copper, iron ore, bauxite, and so on.

However, this focus on transnational corporations in an environmental and social context was not completely new. Whereas the focus was previously on how to regulate them, it shifted toward cooperating together in solving challenges. Issues pertaining to pesticides and accident prevention in the chemical industry had already been addressed in the 1970s and the 1980s.

The report picks up and credits constructive initiatives led by corporates to tackle environmental challenges. The 1984 World Industry Conference on Environmental Management (WICEM) is explicitly mentioned. The follow-up of this conference, the International Environment Bureau (IEB ), a group of corporations from a number of developed countries committed to assist developing countries with their development needs, is also mentioned. “Such initiatives are promising and should be encouraged” (page 271).

It is disappointing that the challenges the Brundtland report put forward in 1992 are the same challenges we are facing today. The main difference is that the problems associated with these challenges are even more extensive and advanced today than they were 30 years ago. The role of the international economy, population and human resources, food security, endangered species and ecosystems, energy (nuclear energy, wood fuels, renewable energy, and energy efficiency) are all put forward as areas that need action. Fossil fuels are identified as a continuing dilemma, nuclear energy as an unsolved problem, wood fuels as vanishing resources and renewable energy as a source of untapped potential.

Industry is urged to produce more with less. Efforts are needed to manage the commons: oceans, space and the polar regions, peacekeeping, and proposals for regulatory change. Already then, the challenge of CO₂ emissions and global warming were being discussed. The only difference between now and then is that whereas annual CO₂ emission in 1986 was 20 billion tons, in 2019, a little more than 30 years later, the CO₂ emissions have almost doubled to 36 billion tons (Ritchie & Roser, n.d.). Still, alternative and more sustainable energy sources have emerged at a continuous lower price. Solar power cost has, for example, fallen by more than 85 percent in the last decade and is now able to generate electricity at a lower price than the world’s cheapest new coal plants (Ambrose, 2021).

Relatively however, there are disturbingly few areas in the world which have improved with regards to the total global footprint since the Brundtland report was released. Still, there are exceptions, and one example is the emissions of gases that contribute to the depletion of the ozone layer. Through a UN agreement, these emissions have almost been entirely phased out. This is an example illustrating how collaboration between companies across borders can have a major positive impact—even, and maybe due to, less interference from nations. This successful case deserves further attention and will be described in greater detail later in the chapter.

2.6 UN and Sustainable Development (UNCED): The Rio Conference 1992

In June 1992, 178 nations, more than 100 heads of states, and over 2000 representatives from non-state actors such as businesses and NGOs, joined together at the UN Conference on Environment and Development (UNCED), also referred to as Earth Summit, in Rio de Janeiro. Prior to the meeting, countries had been working on drafting treaties aimed at preserving biodiversity and the climate to protect the planet. These two issues were perceived as the most challenging from an environmental standpoint. The result of the Rio Conference was, among others, the Framework Convention on Climate Change and Convention on Biological Diversity.

In addition, Agenda 21 was launched, a comprehensive report on actions needed worldwide to attain sustainable development. Reducing unsustainable consumption in rich countries was a key message. Global, national, and local actors were part of this plan. The main focus however was on government actions and there was less focus on role of corporations. In this 351-page report, the term “corporation” was only mentioned 39 times and “business” 69 times. One can argue that to solve the challenges raised, actions involving companies would be crucial—yet their role in developing Agenda 21 was minor.

The Agenda 21 never became an important tool or initiative in the pursuit of sustainable development. In that respect, the UN SDGs, which to a large extent were written with the same purpose as Agenda 21, have become much more prominent and applied. Maybe one of the reasons for this is that corporations were more involved in the process. The fact that the 17 SDG goals are also organized in a simple and colorful way, not in a lengthy report, might also explain the attention they have received.

The 1993 Convention on Biological Diversity and 1996 Convention to Combat Desertification have both had limited effects and are largely considered failures. The absence of good data, funding, and a dedicated body to oversee implementation are typical explanations for the lack of results.

The Framework Convention on Climate Change did not have any specific targets. However, this framework created the basis for the Kyoto Protocol in 1997, which entered into force in 2005. In this protocol, industrialized countries committed to reducing their emissions of all greenhouse gases by about five percent from 1990 to 2012. Few, if any, countries actually reached this goal. As with most conventions, there were no penalties associated with not meeting the set targets.

The fact that the negative effect of rising CO₂ emissions are clearly visible today with sea water levels rising, changing temperatures and bouts of extreme weather, all serve as reminders of its impact on climate change. These clear signals have generated more interest among nations to follow up and take measures to attenuate the situation. At the same time, it can be argued that adapting to the global warming challenges locally by for example changing building codes or constructing further away from the coastline have received more attention and funding than reducing the international global problem of climate change.

Following up the Climate Convention of 1992, and later the Kyoto Protocol, the Paris Agreement was launched in 2015. This was the first legally binding international treaty on climate change. The goal is to limit global warming at least below two degrees Celsius compared to pre-industrial levels. Almost all countries in the world have endorsed the agreement which includes provisions for implementing climate actions. Still, only certain provisions carry legal force and signatories can decide whether or not to fulfil their pledge or withdraw entirely from the agreement as the United States suddenly did in 2019.² Luckily, the United States decided to reenter a year later after a change in political leadership.

Annually, there is an international climate meeting called the Conference of the Parties (COP ), where there are discussions on implementing the climate convention. The main challenge, however, is to make countries actually follow up on their pledge and commit financial support to developing countries. By 2020, the goal was to raise $100 billion USD annually. By 2017, developed countries had only managed to raise slightly more than $70 billion USD to help developing countries mitigate and adapt to the negative effects of climate change (Laramée de Tannenberg, 2019). Most recently, there is a dramatic need to financial assist developing countries in their efforts to counter COVID-19, which is competing in priority.

2.7 Corporate Engagement on Responsibility: From Reactive to Proactive

For a long time, corporations were responding negatively to environmental and social criticism. Gradually this dynamic changed or at least from an official corporate public relations standpoint. A good example on this process of change is the Montreal Protocol. In the 1970s, it was discovered that fluorocarbons (CFCs, HCFCs, and HFCs), used in for example refrigerators, freezers, and air conditioners, were depleting the ozone layer, resulting in an increase in solar radiation and global warming. Still, major producers of CFCs such as DuPont and Honeywell consistently argued that their products did not cause the hole in the ozone layer. However, after a long process, CFC producers participated in drafting the Montreal Protocol, a plan to phase out ozone depleting substances, which entered into force in 1989. After 25 years, almost 98 percent of these substances had been phased out, and new and less damaging products had been developed to replace them. In retrospect, the agreement could be deemed quite successful and serve as a good example for other international environmental agreements. If the Montreal protocol had not been successfully implemented, it would have added an extra 2.5°C to current global warming projections by the end of the century.

It is suggested that the first time transnational corporations were officially invited to the UN was when the International Chamber of Commerce (ICC ), the largest and most representative business organization in the world, gave a 15-minute presentation at the Stockholm conference in 1972 (Gleckman, 1995). The first World Industry Conference on Environmental Management (WICEM I), referred to in the Brundtland report, took place in 1984. The second WICEM conference took place in Rotterdam in 1991. After WICEM II the book, From Ideas to Action (Willums, 1992), was published.³ From lobbying against environmental regulations, large corporations had shifted their strategies to participating in shaping international environmental regulations to be more effective and operational. Corporate involvement in sustainable development also serves to avoid draconian regulations by politicians with no business experience nor competence in the field.

Still, there were actors from outside the business sphere, who were skeptical of the ICC, claiming that the motives behind these corporate initiatives were to avoid controlling regulations which would be good for the environment but bad for business. Corporations on the other hand claimed that the UN was unfitted to develop regulations, which would efficiently lead to a more sustainable world—and companies. The ICC was also struggling with long-time frames in their decision-making processes due to its many members and democratic organization.

To be able to come up with a significant and coherent contribution to the Rio Conference in 1991, a more agile organization was needed. To respond to this challenge, a group of transnational corporations, many of the world’s largest corporations at the time, joined forces through the Business Council for Sustainable Development (BCSD), later adding World to the title (WBCSD ) in 1991 (Gleckman, 1995). Stephan Schmidheiny, a wealthy business entrepreneur, was appointed as chief adviser for business and industry by the UN Secretary General in association with the Rio Conference. WBCSD was a CEO led organization with initially CEOs from 48 international companies, for example, ENI Italy, Volkswagen Germany, 3M USA, Nippon Japan, ABB Sweden, TATA India, Shell Group UK, Rio Brazil, and Norsk Hydro Norway. The members were carefully selected and joined by invitation only. The fact that the member CEOs spoke in their personal capacities, rather than on behalf of their respective enterprises, made the organization efficient. The BCSD represented a constructive group of leaders, who were keen to work on sustainable development across sectors and borders.

Schmidheiny together with the BCSD CEO members published the book Changing Course, A Global Business Perspective on Development and the Environment, in May 1992, in time for the Rio Conference in June the same year. Different companies worked together to provide solutions to key challenges from a business perspective. This was perhaps the starting point for a unified global corporate collaboration for sustainable development and it also coined the concept of eco-efficiency. In the book, each chapter was written by different groups of transnational companies on how to address sustainability challenges. Having worked as the coordinator, administrating the 25 member companies of the Energy Working Group, which formed the basis of the Chap. 3 “Energy and the Marketplace”, I witnessed and recognized the true environmental concern and constructive attitude among the all CEOs involved.

However, the main contribution of the book and the WBCSD was perhaps the establishment of a forum for companies pursuing sustainable development, contributing approaches and solutions that would be realistic for the business community. Since 1992 the WBCSD continues to grow, now boasting almost 200 “forward-thinking global companies committed to advance the sustainability agenda”, working actively on projects and plans across the world.

It is important to keep in mind that corporations sometimes have the capacity to implement changes more quickly and efficiently than governments, where decisions have to undergo an extensive political process. The top management and the board of directors can make decisions, say to become carbon neutral within 10 years, in just one day, whereas politicians can talk about this for years without committing to an agenda.

The importance of the role of corporations can be illustrated by their sheer size. For example, Walmart is the world’s largest company with respect to employees. The company has about 2.2 million employees, which is more than the total populations of Slovenia (2.1 million people), Cyprus (1.2 million people), and Luxembourg (0.6 million people) (Worldometers.info). This underlines the importance of involving and regulating corporations in order to make strides in sustainable development.

Although corporations are the main emitters of substances such as CO₂ and waste, relative to production, it is fair to acknowledge that companies have also made improvements in time. Moving from producing big gas guzzlers to small electric cars is one example. Developing LED light bulbs to replace incandescent light bulbs is another example of sustainable innovation. However, as the global population increases, consumption follows step and the total amounts of emissions and waste have increased as well. Still, the emissions and pollution per product to a large extent have been reduced.

Typical of environmental issues is that there is a lag before we become aware of its negative effects. There are many examples of products that exhibit such characteristics. Asbestos, a mineral exhibiting insulation and fire-resistant properties is one such example. After years of using asbestos in the construction industry, asbestos was many years later found to cause cancer and other illnesses. Now, it is banned in over 60 countries.

2.8 UN Conference on Sustainable Development, Rio+20, 2012

In 2012, another UN conference on sustainable development was arranged, again in Brazil, often referred to as Rio+20. This time, Agenda 21 was followed up and a new document, “The Future We Want”, was introduced. This document focuses on the most critical global challenges facing society including poverty eradication; food security and sustainable agriculture; energy; sustainable transport; sustainable cities; health and population; promoting full and productive employment.

The Rio+20 conference did not attract as many heads of states as the Rio conference in 1992 and no legally binding agreements were adopted. Still, a common agreement for a global framework was structured and a call was made for drafting a set of sustainable development goals. This conference in effect was the key driver for the development of the SDGs, which will be further discussed in Chap. 4.

2.9 Responsibility: From an Ethical Point of View

Companies and their employees continuously face situations associated with sustainability where there is no absolute “right” or “wrong” decisions. Such situations can be linked to temptation, crises, and paradoxes. Many of these situations pose ethical challenges. The question often arises; to whom is the company responsible and how far does that responsibility reach?

In such situations, it can be useful to reflect on alternative decisions from a more classical ethical point of view. In this chapter, I will discuss different corporate dilemmas from the point of view of key ethical perspectives: virtue ethics, duty ethics, and utilitarianism. Even though the philosophers with these perspectives lived several centuries ago, from the point of view of decision-making, it is still equally relevant even though the setting has changed.

To illustrate an ethical dilemma, I will use the timeless and well-known Trolley problem. Philippa Foot, a moral philosopher, put forward this dilemma over 50 years ago, and since it has been extended and discussed so much that it has opened a whole field, sometimes referred to as trolleyology. The dilemma is what a bystander can and should do when an out of control trolley is heading toward five people on railroad tracks. The bystander can take an active role, pull a lever which will divert the trolley to an alternative track and lead to only one death. Or, by doing nothing, the bystander will witness the trolley collide into the five people on the tracks, which will result in five deaths. The bystander’s dilemma is essentially a question of whether or not to be passive or active, interfered as the events unfold, and to which extent we should act on personal values to change situations. This case can initially seem rather farfetched with regards to corporations; however, today companies are continuously facing similar challenges. They are confronted with situations that have no rules or regulations to guide their decisions. A contemporary example is participating in the nascent self-driving car industry.

Ethical considerations for self-driving cars are becoming increasingly relevant today as the technology advances. On the one hand, such cars can actually reduce accidents and contribute to less traffic problems. However, they also include ethical challenges. If a self-driving car faces an unavoidable accident, who should be saved if the alternatives are either the car owner (the passenger) or a pedestrian, perhaps a child or elderly person. Alternatively, if the child or the elderly person is walking across the road on a crosswalk, should the car automatically go off-road and injure or kill the passenger or hit the pedestrian to protect the car owner? Mercedes-Benz received lot of criticism when they stated that their self-driven cars would be programmed to prioritize saving the life of the car owner (Morris, 2016).

The above example illustrates how ethical dilemmas can be timeless. Based on that, I will discuss three different ethical approaches and link them to more contemporary situations which are relevant in a sustainability setting. This can be useful in clarifying and evaluating different options facing corporations.

2.9.1 Virtue Ethics

Virtue ethics are often associated with Aristotle, who lived in Greece over 2400 years ago.

According to Aristotle, happiness (eudaimonia) is the ultimate goal. However, he argued that indulging in pleasure does not lead to happiness. Happiness is associated with the character of the decision maker. A person, or as we shall see, corporations, with the right character will make the right decision. The right character is developed through experience and is a balance between different virtues. This is often referred to as a “golden mean”, not too much or too little of different characters.

The four cardinal virtues are prudence, temperance, courage, and justice. These virtues are regarded as the basis for living a good and righteous life and relevant to managers and leaders as well. Behaving with prudence includes not making hasty decisions. Temperance is for example about not giving up when the company is struggling. Courage is about not always doing what is most convenient and comfortable and an example of justice is treating employees equally, irrelevant of race or gender. Finding the right balance makes us capable to make the right decision in different situations and gives a level of achievement and contentment, thus happiness.

A simplified example of virtuous behavior related to sustainability is what a manager of a company in the fossil fuel sector, like BP, Shell, and Equinor, faces. Given that CO₂ emissions from the industry contribute to global warming, there are many different approaches a manager could take to make the company sustainable. Deciding to dissolve the company could be considered extreme, yet some environmentalists advocate it. Alternatively, the manager could take a more balanced approach. The company could gradually decarbonize its operations, improve its energy efficiency and shift the core business to renewable energies.

Aristotle’s perception of the pursuit of happiness reflects the values of the time and place of his life. More than 2000 years later, and with knowledge associated with many different cultures, what is the “right” decision is even more complex than that during Aristotle’s time. For individuals today, the understanding of what right behavior entails is often closely associated with belief systems. Different religions can vary greatly in their interpretation of what is right and wrong in the same situation. Sometimes extreme interpretations of religious text for relatively minor offences elsewhere could result in the death penalty. For some suicide, terrorism can be perceived as virtuous martyrdom. This illustrates how the understanding of virtues differs across the world. Variation between what is right and wrong also exists among leaders and in company cultures. All these different interpretations and contexts reinforce the need for and importance of the UN SDGs, adopted, supported, and commonly agreed upon by the majority of world’s nations.

Corporations can also be perceived as individuals with rights and responsibilities. To develop its own character, their “virtue”, most large companies today have developed mission or vision statements, and a set of accompanying core values conveying what exactly they are pursuing along the lines of sustainability. Patagonia’s purpose is to be “in Business To Save Our Home Planet” and IKEA’s vision is “to create a better everyday life for the many people—for customers, but also for our co-workers and the people who work at our suppliers.” These are examples in which companies acknowledge their virtuous responsibility for a sustainable future. More examples on corporate vision and mission statements are presented in Chaps. 5 and 7.

Key virtuous words in corporate purpose and mission statements are examples of the relevance of Aristotle today. Examples of such key values are typically “honest”, “trustworthy”, “innovative”, “loyal”, “reliable”, “responsible”, “collaborative”, “ambitious”, “sustainable”, and so on. A study analyzing how sustainability in the S&P 500 is reflected in corporate strategic documents found that “generating the profit” appeared in 69 percent of companies surveyed, “caring for the people” appeared in 34 percent and “safeguarding the planet” in 14 percent of the respective companies. Further, 12 percent of the companies included references to the triple bottom line in their strategic documents (Baral et al., 2016). 

2.9.2 Duty Ethics Deontological Ethics

Deontological or duty based ethics is associated with several philosophers but in particular, Immanuel Kant, who lived more than two centuries ago. He argued that actions should be judged as “right” or “wrong” in and of themselves, not as the consequences of those actions. What is right or wrong is anchored in supposed universal moral principles of rules, such as it is wrong to steal, kill, and lie. Corporates should abide and make decisions based on local and national laws, even if the results do not lead to an outcome that is best for everyone.

From a deontological perspective, in which stealing is wrong, Robin Hood, taking from the rich and giving to the poor, would be unacceptable. For CEOs today, a deontological dilemma is whether or not their duty is to put shareholders first—or other stakeholders—or society as a whole. Is it acceptable to continue emitting CO₂ as long as it is legal, or does the company has a duty to reduce its CO₂ emissions even if it is not required?

In a corporate setting, companies are expected to follow the law. Breaking the law is rarely perceived as acceptable and based on a deontological approach, abiding by the laws and regulations is sufficient. However, during the last decades, as the level of responsible behavior among corporations has received more attention, the market and customers often expect companies to go beyond what is legally required.

In developing countries, regulations associated with social and environmental issues, such as working conditions and emissions can be less strict or lack systems to enforce compliance. Corporations, especially operating internationally, can be criticized by NGOs and media, even if they were following local laws. In response, several companies have set stricter self-imposed frameworks for operation that go beyond local or even international laws.

A key concept of the deontological ethics is that the laws should be universal. The challenge is that this is not the case. Working to write laws that are fair and just for all is important from a deontological perspective. The UN Human Rights principles are an example of a framework for universal societal laws, anchored in Kant’s view. This applies to the UN Global Compact for corporations and the UN SDGs for society in general. In this setting, the value of duty ethics becomes more evident, even though the concept might seem wrong, when applied to for instance the Robin Hood example.

2.9.3 Utilitarianism and Consequentialism

Utilitarianism and consequentialism are terms often used interchangeably. Both focus on the outcome of a decision, not the decision itself as such. David Hume, Jeremy Bentham, and John Stuart Mill, who lived several centuries ago, are often associated with the concept of decision-making based on bringing about the greatest amount of good or happiness for the greatest number of people.

According to utilitarianism, the result of the action is what matters—or the goal justifies the means. The optimal decision is what amounts to the most happiness for the most people. According to utilitarianism, Robin Hood stealing from the rich and giving to the poor would be ethically right. Helping a terminal ill person, who want to die would be acceptable from a consequentialist perspective. If corporation employs children in developing countries is acceptable when the alternative is begging or prostitution or not enough food to the family. From the consequentialist perspective, the goal justifies the means. While many people believe that child labor is wrong in any form, there are others who think it might be acceptable if the alternatives are even worse.

Still, a problematic area with the utilitarian approach is that it is not explicit whether the goals considered are in the short-term or long-term time horizon. What is best for the most in the short-term perspective might not be the best for the same people in the long term.

Virtue ethics, duty ethics, and consequentialism and utilitarianism are different approaches to the framework for deciding to whom and how the corporation is responsible. At first glance, these approaches to decision-making can seem quite farfetched. However, evaluating alternatives from the different ethical perspectives can prove to be a valuable tool in a tough decision-making process. Corporations might confront a dilemma in deciding to whom they have responsibility. Is it to the shareholders, the employees, or the customers? There is a thin line in determining which philosophy to apply in a constantly changing business environment. Particular to a sustainability setting, the uncertainty of what is right and wrong and to what extent a corporation is responsible is associated with dilemmas and challenges.

2.10 From Environmental Concern to Corporate (Social) Responsibility (C(S)R) and Sustainability: A History

Throughout recent history, there have been a multitude of terms, which have been applied to corporate engagement with environmental and societal challenges such as corporate citizenship, corporate responsibility (CR ), corporate social responsibility (CSR ), business ethics, Environment Social and Governance (ESG ), sustainability, and even philanthropy. These concepts come from different traditions, yet they are often used interchangeably. What is common is that the concepts address the societal responsibility of corporations—with a special focus on environmental and social issues. Much of the discussion associated with these concepts regards how far this responsibility stretches, how it relates to business, and how to measure performance.

Until 2000, little attention was paid to CSR and it was hardly addressed by corporations or mentioned in the media. Figure 2.4 shows how the term gained the attention of the media over time since 1987.

Fig. 2.4

Factiva database search on “corporate social responsibility”

The growth in media coverage of corporate social responsibility does not necessarily indicate an improvement in corporate behavior, specifically responsible companies, but rather the attention was paid to irresponsible companies. From the onset, companies’ engagement and reporting on responsibility and corporate responsibility was predominately driven by criticism, especially from non-governmental organizations (NGOs ) such as the World Wide Fund for Nature (WWF), Amnesty International, Green Peace, and so on. It is also seemingly a paradox that the companies which reported the most on environment and social issues were also those which were most scrutinized. In short, criticism was the driver for non-financial reporting (Ditlev-Simonsen, 2014).

Corporate reporting was probably initially based on pressure to show interest beyond making a profit. The fact that competitors started reporting was also likely a motivating factor. Figure 2.5 provides an overview of the development in “non-financial” reporting for the Financial Times (FT) 500 Top Global Companies. The graph illustrates the growth in such reports between 1989 and 2012. These non-financial reports carried different names which have changed over time. In the beginning, almost all extra-financial reporting was issued as an “Environmental Report”. Then around 1998, companies started naming these reports with terms associated with “sustainab-” or “responsib-”. After 2000, the term “environment” in the report title declined and was replaced with “sustainability” and “responsibility”. This does not imply that companies no longer reported on environmental issues, rather that they began reporting on social issues as well. These new reports included environmental and social issues. It is also evident that “sustainability” became more popular than “responsibility”.

Fig. 2.5

Title (and focus) in extra-financial reporting —Financial Times (FT) 500

By year 2005, around four out of five of these companies issued extra-financial reports, and the growth in reporting flattened out. This does not imply that the companies have levelled out, rather that companies started to include reporting about the environment, sustainability, and responsibility as part of their annual report. This merging of the annual report and sustainability report generally indicates that sustainability is integrated into the core business and operations, rather than a separate nice thing to do.

In the beginning, many companies outsourced their non-financial reporting to external consultants. For several public relations companies, production of non-financial reports became a new field of business. There were ways to detect whether companies were outsourcing their sustainability report. If the report had a different look and layout from the financial report or one was on recycled paper and the other was not, the report production was likely to have been outsourced. If the annual report did not refer to environmental and social issues, then the non-financial report was likely to have been outsourced. The format of the extra-financial reports was also an indicator. If the majority of the content was nice pictures and nice stories, it is more likely the report writing had been outsourced. Concrete goals conveyed with figures and key performance indicators (KPIs) generally suggests that the company takes sustainability seriously. However, the best way to ensure whether sustainability issues are integrated into a company’s operations is to check if environmental and social issues are mentioned in the annual report—not only in a separate report.