Michael McFall is the co-Founder and co-CEO of BIGGBY COFFEE as well as author of the Inc. Original book GRIND.
On September 13, 1970, the economist Milton Friedman published “A Friedman Doctrine – The Social Responsibility of Business Is to Increase Its Profits” as an op-ed in The New York Times. The article was of a moment, likening corporate social responsibility to socialism and setting a standard that business executives should prioritize profits above all else.
According to Friedman, corporate responsibility was not tied to fighting inflation, lowering unemployment, caring for people or reducing environmental impact. Instead, Friedman argues, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.”
This argument held significant sway over our collective thinking about businesses and their role in our communities and countries before manifesting, with disastrous consequences, in the 2008 financial crisis and subsequent Great Recession.
Today, this debate continues to reverberate as brands consider their responsibility to address the same pressing issues like inflation, employment relations and environmental impact. More than 90% of S&P 500 companies publish ESG reports, while 63% of investors say they are more likely to purchase stocks or funds of companies aligned with their values.
This pendulum swing doesn’t solve the problem. Instead, it exposes the false dichotomy between profits and business success that ignores a compelling vision for thriving companies and communities. That’s why companies should look to create holistic value with an impact that lasts. Here’s how to embrace that priority now.
1. Contribute To Your Community
It’s been in vogue to create as much wealth as possible without considering the collateral damage of unfettered growth and development.
To build companies and create holistic value that lasts, companies must consider their local, national and global context, striving to be strong stewards of their communities. This means that they should prioritize the well-being of the community and the environment and take an active role in promoting their growth and development.
Specifically, this can be achieved by:
• Paying competitive wages. More than half of employees say their pay isn’t keeping pace with inflation. Meanwhile, many employees at the country’s biggest food and retail chains aren’t adequately compensated, earning less than $15 per hour. As a Rolling Stone analysis succinctly asserts, “It’s a matter of corporate policy to pay people well below a living wage.” Simply put, sustainable companies will pay a fair wage, understanding that it’s a foundational element of sustainable businesses.
• Using resources to build community. Supporting local organizations, nonprofits and charities can bolster communities, making them more resilient and responsive to shifting challenges and emerging needs.
• Minimizing environmental impact. Commercial buildings are prominent polluters, accounting for meaningful amounts of greenhouse gas emissions. At the same time, businesses can evaluate the environmental impact of their operations, product and expansion, adopting emerging best practices to minimize local environmental impact.
By being strong stewards of their local communities, businesses can not only contribute to the overall health and prosperity of the area but also enhance their own reputation and build positive relationships with their customers and stakeholders. Furthermore, taking a proactive approach to community stewardship can also help businesses gain a competitive advantage and drive long-term success.
2. Develop Your People
Valuable and sustainable companies will invest in and develop their people personally and professionally.
For example, more than half of employees say they need to learn new skills within the next year to advance their careers, and nearly half say they are “not as skilled as they need to be.”
Helping employees acquire new skills is important for both the individual and the company. By providing training and development opportunities, businesses can help their employees stay up to date with the latest industry trends, increase job satisfaction, elevate productivity and improve work quality.
However, people need more than skills to thrive personally and professionally. Sixty-five percent of employees say that the recent pandemic changed their attitude toward the value of aspects outside work. As a result, people are looking for meaning and purpose, and it’s the leader’s job to help people achieve this outcome.
To build a valuable and sustainable company, build a place where people can be supported, nurtured and loved. Make it a place where people can pursue their dreams and ambitions, and watch people flourish.
3. Consider Your Legacy
It can be difficult to consider your individual and collective legacy when daily dilemmas, quarterly earnings reports and novel challenges demand our attention.
By considering their legacy, business leaders can ensure that they are making decisions that will have a positive impact on the company and its stakeholders, both in the present and in the future. This can involve taking a long-term view and focusing on sustainability, ethical practices and social responsibility.
To be sure, building a legacy that lasts doesn’t mean forfeiting business opportunities. Instead, it serves as the impetus for delivering extraordinary amounts of value to the customer, going above and beyond the expected to achieve the extraordinary.
This is how you win as a business. Impacting people and serving customers for the long haul.
A Final Thought
The Friedman Doctrine, the prioritization of profits over people, has not produced the thriving employees, engaged communities and sustainable profitability that he envisioned. That doesn’t mean that we need to careen in the opposite direction.
Rather, companies should look to create holistic value with lasting impact. This can be achieved through strong community stewardship, investing in human development, considering the long-term implications of business decisions and prioritizing sustainability. By embracing these priorities, businesses can create value that lasts and contribute to their communities’ overall health and prosperity.
Article Credits: Forbes