In his famous article, "The Social Responsibility of Business Is to Increase Its Profits," originally published in the New York Times Magazine on September 13, 1970, the conservative economist Milton Friedman stated:
"There is one and only one social responsibility of business-to use it resources and engage in activities designed to increase its profits... to make as much money as possible."
I wonder what he would say today if he saw CEOs talking about "conscious capitalism" or "capitalism 2.0?" Imagine Friedman seeing company marketing departments promote their brands' social consciousness, like Panera's "Live consciously. Eat deliciously.," Wal-Mart's "Save money. Live better." or H&M's "conscious collection." Better yet, imagine him learning that Campbell's Soup changed its tagline from "M'm! M'm! Good" to "Nourishing lives everywhere, every day," because the company wants to shift its marketing focus from flavor to "nurturing and sustaining," or discovering that McDonald's now promotes its sustainable fishing certification through the Marine Stewardship Council when selling its Filet-o-Fish sandwiches.
Even Friedman would have to admit that there is a tectonic shift occurring in how companies are redefining their role in society. Companies are combining profit and purpose to create long-term value for their customers, employees, communities where they operate, and especially their shareholders. What would Friedman say about the growing movement inside stock exchanges, investment firms and C-suites to place a greater focus on the long term and rely less on quarterly analyst calls? Increasingly, companies and the investment community are realizing that a short-term focus ignores the fact that society and business impact each other in ways that should be factored into a company's balance sheet to better position itself to compete in the long term. I think Friedman would see that these pillars of free enterprise have taken a dramatic shift in just one generation.
As someone who advises Fortune 500 companies on how best to communicate sustainable business practices, I attend a lot of meetings where corporations and non-profits concerned about the intersection of business and society gather to discuss the latest trends and best practices. But a recent New York City conference titled Corporate Social Responsibility and Investor Relations - Maximizing Shareholder Value (sponsored by CapitalLink in cooperation with NYSE Euronext) provided a different perspective. The forum brought representatives from the corporate, investment and finance communities together to discuss the ways in which social responsibility could maximize shareholder value. Panelists represented such brands as AT&T, Alcoa, Merck, Johnson & Johnson and Campbell's Soup Company. Representatives with these brands were on the same panels with people from the finance and investment community like BlackRock, Bloomberg, UBS Investment Bank and Calvert Investments. Even the location of this forum was notable and symbolized this attitudinal shift within the business and finance community--it was held at the conservative Metropolitan Club, which elected J.P. Morgan as its first president.
During the conference, all participants saw the link between social responsibility and long-term profitability. They also recognized that the current divide between purpose and profit must be bridged in order to fully maximize shareholder value. This gap is largely the result of a language barrier that exists today: put simply, CSR and sustainability executives inside companies speak a different language than the finance community. VOX Global conducted a study in 2012 of corporate sustainability leaders which revealed that to be successful in their jobs, these leaders must avoid the jargon of sustainability and use terms and business objectives their colleagues would understand. Likewise, investors and financiers need to have the jargon of social responsibility and sustainability translated into the language they understand.
The conference panelists underscored the importance of communications in bridging gaps between those who spend their day in finance and those who work to further sustainability goals. Comments included:
•Nonfinancial issues do matter, but a massive language gap and a "glut" of information exists in the public domain...only five percent of it is useful and the rest is noise that gets in the way.
•Language matters and a lot of the language currently used is divisive...and turns investors off...
•No one really knows how to discuss sustainability in a financial setting.
•Data is available but not being properly communicated.
There's been lots of discussion about how companies should communicate their social and environmental commitments to consumers. Now, focus is needed on how to translate social issues into the language the financial community understands. "Corporate excellence," for example, is a phrase that investors and financial institutions understand and can support. It provides a communications framework for a company to discuss how it operationalizes non-financial issues into its business strategies to increase its long-term competitiveness.
We also need to help educate investors and analysts about the importance of "green" when evaluating the long term financial health of corporations. Translating this word into tangible bottom-line cost savings to a company, in addition to showing how a company can be more efficient and better able to compete in an economy where natural resources will be strained, are business terms they can understand. What the investment and financial representatives are telling us as CSR and sustainability leaders is that the best way to begin this conversation is to discuss social issues in the framework of what it means to be a well-run business.
In looking back at Friedman's article, another passage is noteworthy to highlight:
"Whether blameworthy or not, the use of the cloak of social responsibility, and the nonsense spoken in its name by influential and presti¬gious businessmen, does clearly harm the foun¬dations of a free society."
I would argue that, today, if a company ignores this "cloak of social responsibility," it actually threatens the foundations of a free society. Milton, rest in peace.