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Editor at ReformerMag, Writing on Governance, Institution, and Liberalism.

Social business can’t save us

Consumer strength has steadily been increasing along with our access to information. The evidence of this has been clear, be it companies being forced to change their supply chain for ethically sourced material, or the increased role played by corporate social responsibility on the corporate agenda, even if done so with purely promotional intentions. It has become fact that customers listen to socially positive messages.

This coupled with the pure strength shown by the private sector in their ability to directly influence issues of the public concern, mostly negatively through either tax avoidance or lobbying. has led to a severe loss in confidence in governance. This loss of governance has translated into a belief that bypassing what, is now seen as the middle man, and placing demand side pressure on business might be the best way to achieve public aims such as the use of green energy and the end to factory farming.

The demand driven economy

The sensitivity of corporations to market demand is unquestionable; it’s the cornerstone of capitalistic theory. We have seen entire markets develop, adapt, and grow to meet demands, from reality TV to tabloid newspapers, driverless cars and autonomous space rockets. On that basis, neo liberal theory would easily lend its voice to those who believe in demand driven corporate change. As a matter of fact the neo-liberal argument would take it as far as arguing that the removal of all business legislation would also remove the need for corporations to lobby the government in the first place, restoring all to its natural order.

Corporations however do not operate in this perfect market, and their ability to influence demand is just as strong as the other way around. Case in point would be the smoking industry; one that has grown almost exclusively through the demand generated by advertising, demand that has taken decades after its link with health risk to even begin diminishing. As a matter of fact it can be argued that diminishing demand has been a result of nothing but market regulations. This presents the first instance in which the argument for a demand regulated market begins to falter. Entering a battle of influencing demand through information, which is what advocates for social business champion, will give rise to greater misinformation spread by corporations who are better financed and have easier access to the market.

The only solution in sight to which would be the need for regulation on misinformation, which of course brings us back to government.

Segmented efforts

Also integral to the concept of demand driven business is the concept of market segmentation. Corporations will provide different products to consumers from different economic background, and the important bit, under different brands. With there being very little knowledge of corporate governance structures to the public raising awareness on the brand practices of one brand leaves another unchecked.

With price segmentation playing a major role in the quality of goods delivered for price paid, one also questions if demand driven pressure could actually “spill over” to impact goods produced for those on different income scales. Providing demand side pressure by switching to vegetarianism or veganism, or making the switch to bio-degradable cleaning products, might be an option for those who can afford alternative products.

Operating in such a segmented environment also makes it foolish to believe that demand driven pressure is enough to influence entire industries. On the contrary it provides fertile ground for further market segmentation leaving those in lower income brackets fending for themselves, or possibly worse off by increasing overall pricing if more expensive alternatives are forced into an industries supply chain.

Competitive dilemma

Transferring costs to consumers is a major contributor to inflation, something governments are keen to avoid. Keeping costs down is also a major competitive advantage for corporations allowing them to keep a significant profit margin while leaving leverage to undercut competition if need be. Therefore if one was to assume, which is most often than not the case, that using socially amicable means of production are more expensive than what we consider “traditional” means, it won’t be too long before the incentive to revert to cheaper modes as a competitive tool re-emerges.

There are benefits to leading with a socially conscious message even if products may be more expensive, and that is an increase in a corporation’s market reach which would attract additional market segments previously outside of their scope. And that would be correct, but again that reach will only extend to those who can afford it, and will only last as long as that message provides a competitive advantage, something that will disappear with market saturation.

With this in mind the debate then transform into whether or not “socially conscious business” provides enough in differentiating factors to continuously deliver competitive advantages for corporations.

The macro social agenda

A valid argument may be made to nullify that as a concern, in which case the final barrier to unconditional support for socially conscious business will be the scope of impact corporate intervention can have.

Thinking of socially conscious business practice is easy when it comes to environmental conservation, assistance with homelessness and poverty, and building value driven business. But can these elements ever fully tackle issues like wealth inequality, sexism, racism, LGBTQ rights, and degrading mental health? Especially when corporations are the leaders in creating many of these issues, the pay gap, the shrinking of work life balance, stress, exorbitant pay for performance and bonus schemes. The very ideal of business is built on the sacrifice of individual leisure time.

Being built on these foundations, corporations can never be posed to advance social reform as a whole, it can only edge closer to the baseline at best influencing one of the many factors needing to be addressed. Expecting this foundation to change is also naïve and goes against the simple concept of competition that drives business advancement forward. Neither should corporations be expected to play that role, their role is to provide goods and services, to transform raw material into items necessary, or intriguing to have, and through that process of competition they already provide value to society, technological advances, entertainment, and even new modes of interaction. Providing them with the burden of “fixing society” means we are undercutting the very tools that make them innovative.

The real deal

With that, the push for socially conscious business is nothing but a continuation to reduce the negative impact corporations present, something that has been effectively curtailed by the introduction of legislation of fair wages, mandatory holiday time, legislation on equal pay and non-discrimination.

Corporations will forever continue to be a reflection of the environment they operate in, with issues of culture, social equality, and economical justice, beyond their reach. Submitting to them with the hopes that they choose to be champions of these issues is a dangerous balance as they will always be non-representative entities of power that can influence social perception to their benefit.

In all reality then, and irrespective of which lens you choose to look at this issue with, those pushing for demand driven change will always need the support of the government and regulation to influence real change. It is up to ourselves to put pressure not on organizations, but on our elected officials and push them to set the parameters in which corporations must operate in, only then can we implement comprehensive change to the betterment of all society, not just those who can afford it, and ensure that the role of corporate innovation is preserved.

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