The Ecological Responsibilities of Corporations
The metaphor for a corporation used to be a simple mechanical model for turning resources into products. To be successful, a corporation had to grow and turn a profit continually. Unfortunately, the assumptions of the model were also simple and failed to consider human needs and natural cycles, causing great suffering and great disruption.
To be really successful, corporations need to adapt a more comprehensive model, one that reflects stability, cooperation, justice, and respect for nature. With an ecological model, the ecological responsibilities of corporations, to themselves, to nature, and to human communities, are described.
A corporation is defined legally as an individual person, although one that is defined by law and exists only in contemplation of the law, hence it is artificial, invisible, and intangible. A corporation is not the stockholders or officers; it has its own entirely separate and distinct existence. This kind of artificial person was the invention of commercial interests; the first corporations in Britain were granted charters by special acts of parliament to provide services for the state. Most corporations have characteristic legal features: individuality, permanence, limited powers, continuing succession, action in the corporate name, limited liability of members, transferability of member's interests, and representative management. Charters have become easier to get, until now corporations can be formed under general law. Corporations have been adapted to meet most modern business and social needs. Real persons can do anything not prohibited by law; corporate actions are derived wholly from law and limited to the charter, although charters have become very comprehensive statements that allow a great variety of activities.
In the publication "Integrating the Enterprise" by Digital Equipment Corporation, it is stated that "Digital is a living organism," tending toward a state of dynamic equilibrium by adapting to circumstances as fast and economically as possible. This is a natural-enough metaphor, and it leads to interesting deductions.
Like an organism, each business is born, grows to a certain size, then matures and dies—perhaps a natural span is hundreds of years, like the Oxford University Press, for instance, or perhaps only a year like so many new businesses. Biologically, maturity marks the end of physical growth in humans, but not necessarily the end of emotional, intellectual, and social development. Like an organism, the corporation, unconsciously through its officers and managers, starts to act to preserve itself before completing its formative objectives, such as maximizing profit. Like an organism, a corporation lives in place and alters that place to some extent by living, although some of the larger ones risk destroying the mixed community of humans, animals, and plants (and all their associations) on which they depend. Every organism must fit in its community and environment. It must be integrated and limited—self-consciously so in the case of humans and corporations.
Corporations are unique organisms. Corporations are more than just groups of people without structure. Corporations are described by analogy with individuals. But, each has unique characteristics: the corporation has right to property and free speech but not right to worship or vote. They can be longer lived than their human components.
1 Problems with Corporate Organisms
The old analogy of the corporation as a machine leads to bad assumptions: that everything is a resource; that resources are unlimited; that production must continue endlessly; that the corporation has to keep growing to survive; that the purpose of the state was to legitimize exploitation; that the purpose of humanity was to multiply, produce, and consume; and that the purpose of the universe was to supply human and corporate needs. The machine analogy also leads to false economic beliefs: that mass production is most efficient; that obsolescence is necessary for successful growth; that people's needs and wants are fulfilled by advertised products; and, that quality does not matter very much.
Some companies have started to work around these beliefs. Kodak and Head, for instance, have succeeded with custom production, high-quality, long-lived products that people did need. Other corporations are suffering problems as the results of bad assumptions and false beliefs. These problems include: overgrowth, with an increase in complexity and costs (many of them social); economic and ecological instability; social burdens (from pressures on family from relocation and powerlessness); misdirected effort on ill-conceived products; slack employee attitudes and performances (sickness, accidents, turnover, layoffs).
In the effort to control their problems, corporations have sought more control. The corporation tries to avoid being vulnerable to change and uncertainty, fluctuation, and market conditions by relying on planning and control. Corporations try to ensure stability by taking over the supplies of materials, controlling their subcontractors and the buyers of their products, controlling the work force with pay and incentives (as well as by cultivating identification), and managing demand by sales influence and advertising. Many corporations try to be flexible about resources, using what costs the least, say, cheap energy to replace expensive labor. Corporations, especially multinational ones, seek raw materials everywhere, in any nation, under any ocean. Corporations become international, mining, assembling, and selling in three different continents. Where developing countries were once regarded as sources of raw materials, they are now used as bases for manufacturing, and they are becoming growing markets.
This control is possible because corporations have acquired such great power. Large multinational corporations have great power to control national economies and ignore environmental laws, partly because of their historical promise of providing social services to national states. Unfortunately, as private good became identified with public good, corporations became less concerned with social service and more concerned with greater profit through greater technology. Greater technology lets the power to change overwhelm the power to see the consequences. So, social amenities, such as clean air and fresh water, are violated legally—after all, no right of contract or fair use of property has been breached. Corporations exercise enormous influence over our lives, probably more than governments or churches. Furthermore, the size of some companies means that their influence is felt like shock waves through societies and environments. Multinational corporations are a force in the business world and a major influence on world affairs. Size and complexity give them special power, not only financial but political. Power is supposed to evaporate in a purely competitive economy, but capitalist economies are not purely competitive; power accrues to corporations.
Usually the goals of a company are generously, nobly, and broadly stated as intentions to support the best interests of owners, managers, shareholders, employees, the public, and, lately, the earth. Many corporations pride themselves on their generosity and personnel standards and on their good corporate citizenship, although the public concept of good is being extended beyond traditional bounds as citizens become aware of the interactions of business, politics, and the environment. Even corporations that claim to make clean products in safe ways often seem to depend on "dirty corporations'' for power and packaging, as well as for paper and materials.
Business as usual, with its inertial model of growth, could end in
catastrophe for humanity and its environments. Industrial cultures, with their
characteristics of simplification, naiveté, homogeneity, and incompleteness,
turn wild landscapes into flatscapes, where variety disappears and significance
is ignored for the comfortable standards of meaningless continuity. Rapid
growth might precipitate a catastrophe sooner, while modest efforts at
environmental protection and increased efficiency may only postpone
An organic model offers the best alternative, with its emphasis on energy efficiency and alternative sources, its major commitment to environmental protection and the internalization of environmental costs, and its change from growth to stable, sustained development. Such a model would provide organic assumptions and beliefs: that resources are limited, that human value is only part of ecosystem values, that humans are more than consumers and producers, and that the quality of life is more important than quantity of possessions.
Like organisms, corporations may have an optimal size and a home place; organisms that occur out of place are often called weeds, and organisms that grow too large monsters. Perhaps corporations should be limited in size and tied to one place. Healthy organisms, even humans, are educated to take their place in a culture that limits their impact on the environment, proscribes their actions towards one another and towards others outside the culture, and trains them to reproduce themselves and renew the culture. Most corporations act like improperly socialized individuals who have not been taught how to take a proper place in society and how to be responsible for their actions; instead, corporations hide behind their legally limited liability.
Any organism, like robins to fermenting berries, can be addicted to certain things in certain circumstances. Corporations have become addicted to cheap energy and easy defense money. It is possible to create circumstances that limit or cure the addictions (for robins, the berries fall to the ground and get covered with snow).
Ecosystem as Metaphor
Perhaps the metaphor itself is not adequate. Even organisms take a large part of their identity from their context, from the surrounding environment. It might be more productive, since corporations actually contain organisms, mostly human, to consider the corporation as an ecosystem. Ecosystems occur in a large diversity of sizes in nature, from a rotting log to one covering most of a watershed.
Definition. An ecosystem is defined as a biotic community and its nonliving environment functioning together. An ecosystem is also a self-organizing, chaotic system with emergent properties. Ecosystems develop in time. That is, a community develops by an reasonably orderly, directional process that involves changes in structure that results from community modification of the physical environment. Although the physical environment imposes limits and determines pattern and rate of change, the community controls the succession. The result is a relatively stable configuration characterized by a high biomass (or information content).
Characteristics—Energy. The "strategy" of ecosystem development is increased control of (or homeostasis or homeorhesis with) the physical environment—to protect itself from perturbations. There is a fundamental shift in energy flows, as increasing amounts are used for maintenance. The structure of a community changes: organic matter increase, inorganic nutrients are used internally (instead of being extrabiotic), biochemical and species diversities become high, and pattern diversity becomes well-organized.
As more and more energy is used for maintenance, the net community production approaches zero. Agriculture keeps an ecosystem immature in order to harvest the larger yield in immature systems. The mature system becomes more efficient, as it supports a larger biomass with the same amount of energy. The food chains become more weblike (dominated by detritus chains as opposed to linear grazing). Mineral cycles become closed and the nutrient exchange between organisms and the environment slows.
The life history of organisms undergoes change as well. Organisms tend to be larger (perhaps as a result of shift from inorganic to organic nutrients), with longer, more complex life cycles and narrower niche specialization. Population growth slows, with emphasis on the quality of life of organisms. Internal symbiosis becomes more developed, conserving nutrients and resisting perturbations.
Corporations as Ecosystems
Development in Time. Corporations have been evolving for hundreds of years. There have already been shifts in the meaning of corporations and in the forms of organization and style: From a stable product line to continuing innovation process, from a product based definition (shoes) to a process (information), from a single pyramid of organization to constellations of satellite concerns, from the static to the flexible, from product line management to networks and innovations (the management of change), and from stable forms to temporary. Mature systems have a greater ability to trap nutrients for cycling. Corporations have settled in an artificially maintained pioneer state, feeding on the extra productivity.
Energy Use. If corporations follow similar patterns over time as ecosystems, we would expect their "food chains" to become more complex, with most of the energy flow following detritus pathways. Optimizing material and energy use, reusing `wastes' as resources (food webs between companies, where wastes are products, not side-effects), and closing loops by recycling. Reciprocal adaptations between plants and animals, or between producers and consumers, leads to mechanisms that reduce grazing and increase feedback.
Low Productivity, High Stability. A mature ecosystem produces many things, most all of which are used by the system; wastes are broken down into component chemicals by microbes, while other resources, like nitrogen, are fixed to roots by other microbes. The tightening of the biogeochemical cycles is an important trend. Corporations sometimes parallel the aging of an ecosystem, from a pioneer state to a mature state.
Life History, Symbiosis. The longer lived the corporation, the less clear the divisions between private and public and economic and environmental concerns. Short-term individual concerns meld into long-range corporate and social concerns. The short-term pressures may seem immediate and irresistible, but the long-term goals cannot be ignored for long. We may need electric power or paper now, but the cost cannot be the destruction of the source of those needs. We need the social and environmental health and stability first and always. Partnership between unrelated species, say mycorrhizae and trees, becomes notable. Corporations would team up with other companies and social and environmental groups (the pattern could be industrial symbiosis). Pollution is the most limiting factor; possibly we could predict new corps arising to deal with pollution.
Differences. Although ecosystems can be long-lived—thousands of years for tropical rainforests—corporations can disband at any time. Furthermore, unlike ecosystems, corporations still seem to be bound inflexibly by the rule of two-year payback. This means that decisions are based on short-term return and not on long-term durability.
Furthermore, although large organisms are the case for mature ecosystems, the scale of many corporations is too large; the patterns are unsustainable—large institutions lose touch with their constituents, become self-absorbed and less responsible.
The differences between ecosystems and corporations allow for the possibility of changes. Human communities can redefine corporations and limit their impacts. They can change the charter of corporations for the benefit of the community. Corporate responsibility is more complex than a simple linear cost/benefit analysis. Using the metaphors of corporations as organisms and ecosystems, it is possible to outline a new set of responsibilities for corporations and a series of behaviors that human individuals and communities can do to integrate corporate behavior into the communities.
2. Ecological Responsibilities of Corporate Organisms
The public responsibilities of corporations, according to Harvard management, are to grow and prosper (thereby providing customer satisfaction, employment, taxes, and contributions to the economy) and to control their hazards. According to Milton Friedman, the only social responsibility of a corporation is to make money, by striving after profit as an efficient agent of production, although he admits that the corporation should conform to the rules and norms of society.
Profit making is a necessary part of business, but not the sole reason for business. The best business serves public goods as well as private interests. (This is similar to Ruth Benedict's original anthropological meaning of synergy as it applied to individuals. In secure, nonaggressive societies, an individual serves her own advantage as well as that of the group with the same act. The institution ensures mutual advantage; the acts are mutually reinforcing. High synergy institutions transcend the polarities of selfishness and altruism. Virtue pays because the rewards for selfishness coincide with benefit for the society. The social structure of low synergy cultures ensures opposition and counteraction; the advantage of one individual is a victory over another, as in a zero-sum game.) This is necessary for employees, since they have to feel like their work is meaningful and contributing to the public good. The path of production should therefore serve public good as well as profit. Environmental and social problems should get as much attention, because their part of the process, as sales, finance, and production.
Economic recession may bring a re-examination of values, not only by individuals who may have less material wealth, but by corporations that have emphasized growth. The public may insist that corporations consider social performance as well as strictly economic performance. The single economic purpose may only be the focus in a social ecological environment. Economic actions, such as where to build, who to relocate, hire, or dismiss, will be subjected to greater public scrutiny. Corporations will have to adapt to changes in standards. Business cannot assert primary self-interest at a cost to the public or environment. Corporations need to keep track of their environmental impacts. Many of the problems that corporations face are connected to the problems of the environment and society.
Every corporation depends on the stability of the environment and on the stability of social institutions. The environment provides air, water, and land, and provides renewing (both physical and psychological). Institutions, from sanitation, police, schools, churches, and community centers, provide a supporting network. As these institutions wobble or fail, corporations may have to subsidize or replace them to survive. Schooling for example, is often inadequate to provide literate, numerate, or ecolate workers. Police may not be able to provide secure conditions on corporate grounds for female workers. Public transportation to plants from town may not be available in enough volume.
A corporation has traditionally been seen as a morally neutral body, but even if it has only to conform to the nominal rules of society, it is already a moral agent. Corporations are no more neutral than other organisms. Etymologically, the word moral means simply "living together.'. Sometimes even routine business (nonmoral and nonenvironmental) matters become deeper ethical conundrums about justice. Many areas of moral concern already are recognized: worker safety, affirmative action, advertising truth, foreign investments, and harm to the consumer, public, and environment. Corporate responsibility occurs wherever the interests or rights of a person, society, or ecosystem are significantly affected by the actions of the corporation.
Responsibility can be understood in terms of costs and benefits, that is, through operations and their consequences rather than abstract behavior. Every action entails a gain and a cost (or profit and loss). Profits and losses are distributed privately, socially, or environmentally. Unfortunately, the modern system privatizes the gain and externalizes the loss (to the “commons,” considered as a pool of "unowned resources," where in traditional societies, it was surrounded by rules for use). As long as this is possible, it is profitable to charge the cost to the environment. Externalizing costs works fine in an uncrowded world, where the costs are negligible and can be absorbed by natural processes. Resources were traditionally seen as free for the getting; air and water were seen as free sinks. Modern economies, embracing the notion that “nature is capital,” draw on the accumulated “capital” of ecosystems for production. By ignoring the real cost of the capital, as well as the costs of natural services, such as nutrient recycling, soil building, and atmospheric renewal, these economies create a temporary wealth. Decisions regarding resources are made on short-term economic grounds and lead to material shortages and environmental degradation.
Similarly, labor was seen as minimum value. For example, the idea that "labor is a resource" implies that, like any common resource defined by industrial society, labor is cheap and can be used up. The real costs of free goods and externalities have had to be accounted for, yet—this often influences the selection of corporate priorities and growth. Furthermore, the production and distribution system for most corporations is linear (straight throughput) and not circular (complete recycling), although this is logical economically, given our frontier resource-use accounting. Major changes are occurring, though. The scale of civilization now makes externalization unfeasible. The costs of pollution and waste are being internalized; other inputs, such as labor and capital, are becoming more expensive. Corporations will have to internalize or be forced to internalize. With the internalization of costs (since the losses as well as benefits will accrues privately), the system will benefit from intrinsic responsibility.
Corporations need to work cooperatively to make sure the costs and benefits are extended equally throughout the system. They could start by sponsoring the rational use of rare resources through taxation. Influence the government to determine priorities for wilderness areas or special landscapes. Beautiful, fragile, unique, or endangered ecosystems and species must be protected at the expense of commercial activity.
Corporations have at least three large, ecological responsibilities.
2.1 To be Economically Healthy
The first responsibility of a corporation is the maintain its own health, to mature organically. limiting its size and impact to the locality.
2.2 To Preserve the Health of Natural Communities
The second responsibility is to maintain the health of the natural communities—because environmental health is the basis for community health, and community health is the basis for economic health and worker health. The quality of life depends on the quality of the environment. If the environment is degraded to raise the quality of life, the effect will be very limited and never be self-sustaining. Fitting economic costs and needs to the limits of ecosystems and monitoring the economic process would reduce wastes and pressures on natural processes. The coupling of agricultural productivity to a solar budget, and the conscious restoration of degraded systems, would contribute to the health of ecosystems. Sufficient wilderness would allow the self-maintenance of global cycles. With the increase in security, wealth, and self-esteem, human populations could be dependent on ecosystem productivities and still be diverse and unique.
2.3 To Preserve the Health of Human Communities
It is hard to protect communities when the way most business is done tends to disrupt community life. Because of its size, power, and intentions (for profit), the corporation should take higher risks than the surrounding communities. This will ensure the safety of products and wastes.
The corporation, regardless of its legal definition, is a long-lived, collective, impersonal body. Yet, it has more physical, legal and moral power than any one individual. Its investment is long-term in actuality. Many stockholders keep their investments for decades or a life-time. They are not concerned about only one dividend. Like the corporate organism, they want the long-term outlook to be positive; they want to know that their investment is stable and that the quality of life it encourages or supports is continuous.
The complexity of environmental problems should not permit escape of responsibility. The context of corporate responsibility falls within the spectrum from individual responsibility to social responsibility (the designation of property or trading conventions—capitalism or communism). Perhaps that responsibility could be enforced if the entire earth were incorporated and concerned with maximizing its own values: healthy beings in living contexts. Certainly not having `free' services and resources would force corporations to internalize all costs of production.
In any case, there are strategies that a corporation could pursue to become ecologically minded. Instead of treating decisions as trade-offs, an ecological corporation could aim at a congruence of moral, economic, and ecological objectives. Responsibility could be manifested in organizational structure, manufacturing, and marketing practices, without departing from economic decision making.
Such a corporation could bring corporate research and development capacity to bear on the transition to a sustainable society. Where technologies play a role in the transition, companies can assume social responsibilities equal to their size and wealth. By commanding their vast resources, corporations can ease the transition to a sustainable society (which would actually meet their needs for stability). The model of corporate life needs to change, from dependence on continuous growth (of profits and waste), to be being based on stability, sustainability, cooperation, justice, and respect for nature.