When Principles Pay: Corporate Social Responsibility and the Bottom Line

by Geoffrey Heal

Overview

Stories of predatory lending practices and the reckless destruction of the environment by greedy corporations dominate the news, suggesting that, in business, ethics and profit are incompatible pursuits. Yet some of the worst lenders are now bankrupt, and Toyota has enjoyed phenomenal success by positioning itself as the green car company par excellence. These trends suggest that antisocial corporate behavior has its costs, especially in terms of the stock market, which penalizes companies that have poor environmental track records and rewards more socially conscious brands.

The political context of our economy is rapidly changing, particularly in regard to incentives that operate outside the marketplace in a strict and narrow sense and involve interactions between corporations and nongovernmental organizations (NGOs), activist groups, regulatory bodies, consumers, and civil society. These interactions can significantly color a corporation's alternatives, making socially or environmentally harmful behavior much less attractive. British Petroleum, for example, has voluntarily reduced its greenhouse gas emissions over the past ten years, Starbucks, has changed the environmental impact of its coffee production, and Nike and other footwear and textile makers now monitor the labor conditions of their subcontractors.

When Principles Pay jumps headfirst into this engaging and vital issue, asking whether profit maximization and the generation of value for shareholders is compatible with policies that support social and environmental goals. Geoffrey Heal presents a comprehensive examination of how social and environmental performance affects a corporation's profitability and how the stock market reacts to a firm's social and environmental behavior. He looks at socially responsible investment (SRI), reviewing the evolution of the SRI industry and the quality of its returns. He also draws on studies conducted in a wide range of industries, from financials and pharmaceuticals to Wal-Mart and Monsanto, and focuses on the actions of corporations in poor countries. In conclusion, Heal analyzes how social and environmental performance fits into accounting and corporate strategy, presenting an executive perspective on the best way to develop and implement these aspects of a corporation's behavior.

Product Details

ISBN-13:	9780231144001
Publisher:	Columbia University Press
Publication date:	04/02/2008
Series:	Columbia Business School Publishing
Edition description:	New Edition
Pages:	288
Product dimensions:	6.00(w) x 9.00(h) x (d)
Age Range:	18 Years

About the Author

Born in Bangor, North Wales, Geoffrey Heal has lived on three continents and combines a life-long interest in nature with a fascination with the details of how societies work. He is Garrett Professor of Public Policy and Business Responsibility and professor of economics and finance of the Columbia Business School. His research and practical experiences range from technical aspects of financial markets to understanding the economic consequences of species extinction, and one of his main concerns is the effect that societies have on their natural resource bases. A past president of the Association of Environmental and Resource Economists and a director of the union of Concerned Scientists, Heal is the author of many scientific articles and books, including Valuing the Future: Economic Theory and Sustainability and Nature and the Marketplace.

Table of Contents

Preface
1. Introduction
2. Social, Environmental, and Financial Performance
3. Socially Responsible Investment
4. Fincancial Institutions and Social and Environmental Factors
5. Pharmaceuticals and Corporate Responsibility
6. Wal-Mart and Starbucks
7. Interface and Monsanto
8. Outsourcing
9. Getting Rich by Selling to the Poor
10. Cell Phones and Development
11. Measuring Corporate Responsibility
12. Social and Environmental Policies and Corporate Strategy
13. Conclusions
Notes
Index

What People are Saying About This

Joseph E. Stiglitz

A balanced and optimistic account of how companies can benefit from the Corporate Social Responsibility movement. Geoffrey Heal makes a persuasive argument that doing the right thing can also boost the bottom line.

— Joseph E. Stiglitz, Nobel Laureate in economics

Editorial Reviews

Among this book's strengths is its timeliness: CSR and corporate behavior are very much in the forefront of popular and policy attention. Also, by resting the discussion on a solid economic foundation, the author helps the reader understand what CSR is and why it occurs. When Principles Pay is accessible and understandable to a reader even with no background in economics or finance.

Robert Repetto

When Principles Pay is a must read for anyone wanting to understand the corporate world's involvement in environmental and social issues. Geoffrey Heal argues convincingly that the corporation's long term self interest requires that it pay attention to the environmental and social impacts of its operation. Heal makes the argument that the involvement in the world of sustainability is no longer a question of if, but when. One will find his discussion of outsourcing enlightening.

Alan Hassenfeld

With clarity and insight, Geoffrey Heal writes a refreshingly jargon-free treatment of CSR. I found his volume a pleasure to read, and though it will be of interest to a wide range of readers, I recommend it particularly to corporate executives and their non-executive directors, who will find it well worth their while.

Lord Ronald Oxburgh

Geoffrey Heal's scholarly work on environmental economics, the role of the state in economic life, and other contributions to economic analysis have been of great importance and wide reputation. He has now prepared a widely accessible yet careful and responsible study of the extent to which corporations can profit by adherence to socially valuable norms. The exposition makes no assumption of specialized knowledge yet fully reflects and imparts the soundest economic analysis.

Ken Arrow

Although even a cursory glance at a newspaper reveals some new incident of corporate malfeasance-predatory lending, shady deals between private defense contractors and the government, industrial pollution-Columbia Business School professor Heal argues that "there is a cost to anti-social corporate behavior." Heal points out that the most pernicious lenders have gone bankrupt; a defense contractor executive has been fired; and corporations can generate higher profits and more social good if they can align their interests with society The book presents case studies of corporations "doing well by doing good" (Toyota, British Petroleum, Starbucks) and surprisingly diverse and effective economic incentives for business people and organizations to act responsibly. Useful sections delineate the challenges-and rewards-of ethical outsourcing and clarify the important distinctions between genuine social responsibility and the public relations techniques that masquerade as philanthropy. Readers conversant in economics will find a wealth of fascinating analysis, whether or not they agree with the author's optimistic middle ground between unfettered capitalism and intrusive regulation. (May)

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