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Social Accountability: The Business World's New Role in Social Change

image for wavebreakmedia/Shutterstock
wavebreakmedia/Shutterstock
  • Social accountability involves holding businesses accountable to help build a healthy future.
  • According to a recent book exploring consumer expectations for businesses and the changing social landscape, business leaders must take direct action to ensure that society is positively impacted by the services or products that their company offers.
  • Businesses face abandonment by customers and employees if their actions do not meet an acceptable moral standard, warn experts. 

Social accountability is defined as the act of holding institutions to a moral standard that protects people's rights and general welfare. For businesses, this means focusing on more than profit margins and, instead, seeking to bring value to the world at large.

In a paper titled "Social Responsibility of Businesses" by Dr. Nimalathasan Balasundaram, a professor at the University of Jaffna in Sri Lanka, the author explains the shifting role of modern business leaders and further defines social accountability in today's society.

It's the practice of holding institutions accountable to the people who are responsible for their existence. It's the understanding that the vitality of the human race is necessary for a business to continue in a healthy manner and, therefore, imperative for the continuation of capitalism.

For businesses, this may mean losing money in the short term. Social accountability is the act of acknowledging that just because something is profitable doesn't mean that it's a viable idea if it negatively affects the world.

A company's leadership is important in staking out a direction and a culture for the business. But as social values change and become more important to both employees and consumers, it's often from below, rather than above, that true change is driven.

A book published in 2018 by University of Virginia Darden School of Business faculty members James Rubin and Barie Carmichael, entitled Reset: Business and Society in the New Social Landscape (Columbia Business School Publishing, 2018), explores the changing nature of businesses' relationships with the social landscape, their employees and their customers.

"People talk a lot about an erosion of trust," Carmichael told Business News Daily. "This is not new, but what is new is a growing expectation of business's role in society on a global basis. People are shifting their attention from products and services to the companies behind those products and services."

Business often comes with what Carmichael terms "inherent negatives." Whether it's a high demand for natural resources – for example, the need for large amounts of water in soft drink production – or environmental hazards, such as a transportation company's high levels of emissions, the cost of doing business is always more than just dollars and cents.

It's how companies manage those inherent negatives and work to reduce their impact that determines whether or not consumers see them as progressive-minded or social pariahs, said Carmichael. That label can be the difference between failure and success.

"A whole new social ecosystem has been set up and … social ecosystems fuel things like regulations and boycotts and mischief," Carmichael said. "Boards are waking up to it and asking questions that they haven't before."

Carmichael and Rubin relayed the following statistics, which they uncovered during their research:

  • 71 % of people said their expectations for companies have increased.
  • 68 % said it's more important to know how companies operate than what they sell.
  • 94 % of those surveyed said companies can shape a better society.
  • 87 % said most companies exist to create value for multiple interests in society, rather than just profit.
  • 75 % said they converted their opinions of a company into action.

These beliefs and expectations have a huge impact on consumer behavior. People now "initiate conversations with friends and family, change purchase behaviors, and influence others whether to take or not take a job," Carmichael said.

That final piece affects the labor force rather than consumption, an increasingly painful point of reckoning for modern companies. As baby boomers begin retiring and exiting the workforce at a rate of 10,000 per day, the new generation of workers cannot hope to replace those numbers. That means stiffer competition for top talent, and Carmichael said workers are paying attention not just to professed core values, but which companies put their money where their mouth is.

"It's not just customer need and product delivered anymore, but add a third circle of social needs," Carmichael said. "It's customer unmet need, a capability that addresses that need that produces profit, and one that also addresses a social need. We're resetting the sweet spot. Those are the companies that are going to do well."

Social accountability can be demonstrated in different ways.

It could mean reducing waste at the expense of immediate profits. Say you own a clothing company. You know that cheap material will mean customers have to purchase clothes more frequently, which will drive sales. A more expensive, higher quality material will hold up longer and likely cut into your profits in the short term. You also know that the clothes with a cheap material will likely end up in a landfill, compared to the expensive material that is more likely to become a part of someone's long-term wardrobe.

For you, the business owner, practicing social accountability would mean choosing to build a strong brand and use the more expensive material, rather than milking the public for short-term profit by offering the cheaper fabric alternative.

It could also mean conducting your businesses with certain moral standards.

Say you find out that the manufacturer you use to create your clothes uses child labor. Being socially accountable would mean switching to a different manufacturer, even if it presents other issues (e.g., labor costs) for your business. It's better to consider the needs and welfare of workers, consumers, etc., than to focus solely on profits and suffer later if consumers learn that you're not representing their values.

Social accountability doesn't mean you have to sacrifice success. It means valuing the greater good above short-term profit. In this day and age where every move a business makes is under a microscope, practicing social accountability is a long-term brand-building strategy, not a detriment. Businesses can practice social accountability, merely by being aware of how their actions will affect the world. Anything action directly goes against the public good should be avoided, even if it's profitable.

The goal is not to impede success but rather to create a community where businesses and customers can trust one another. It may be a harder relationship to build than one based on exploitation, but in the long term, everyone will benefit.

Business News Daily Editor

Business News Daily was founded in 2010 as a resource for small business owners at all stages of their entrepreneurial journey. Our site is focused exclusively on giving small business advice, tutorials and insider insights. Business News Daily is owned by Business.com.