Corporate sustainability: a brief history

The idea that corporations have a responsibility to society beyond profit maximisation goes back a very long way. As does public concern about the negative environmental and social impacts of business.

A potted history of corporate sustainability in Europe

The birth of modern day ‘Corporate Social Responsibility’ can be traced back to rich industrialists in the 18th and 19th centuries, including Sir Titus Salt, who opened a new mill with a model village for his workers at Saltaire, near Bradford in 1853.  Similar schemes – Bournville and New Earswick – were built by Quaker confectionery dynasties, the Cadburys and the Rowntrees respectively, building parks, hospitals, museums, public baths and reading rooms for the benefit of factory workers.  William Hesketh Lever, founder of Lever Brothers (now the anglo-dutch company Unilever) believed that cleanliness and hygiene should be affordable for all. His idea to create a mass- produced product – the bar of soap – helped to transform the lives of the lower classes in the 1890s.  As well as using his wealth to build Port Sunlight, a village for Lever Brothers' employees, he started pension schemes, unemployment and sickness benefits, work canteens, and the concept of the eight hour day. 

… and in Asia

This is not just a UK or even a European phenomenon.  At the end of the nineteenth century in India, Jamsetji Tata, founder of the global $100bn Tata Group business empire, was much influenced by visits to England. He established the JN Tata Endowment in 1892 that enabled Indian students, regardless of caste or creed, to pursue higher studies in England - an expression of his belief that for India to climb out of poverty, its finest minds would have to be harnessed.

The years after WWI: a time of social justice

In the period leading up to World War I, as global free trade boomed and corporate power grew, the whole idea of Corporate Social Responsibility was seen as a distraction.  The dominant ideology of the time was all about private self-interest as the best way of serving the public good.

This changed after the War. The International Labour Organisation was founded in 1919, as part of the League of Nations, bringing together government, business and trade unions, and was based upon an appreciation of the importance of social justice in securing peace, against a background of ruthless exploitation of workers in the industrializing nations of that time. 

President Franklin D Roosevelt's New Deal of 1934 - a series of measures designed, in part, to limit the power of corporations – had a big impact on European public policy in the aftermath of World War II. Welfare safety nets were put in place, and in the UK, major industries such as coal, railways, steel, gas distribution and power generation were nationalised by the post-war Labour government.   Johnson & Johnson had published its 'Credo' in 1943, in which it affirmed its stewardship role within society.  The Credo stated that its primary stakeholders were its customers, employees and the communities in which it operated, in that order, and explicitly ahead of its shareholders – a radical view then and still radical today! 

The eventual post-war prosperity brought with it new social concerns, however. The 1950s 'pea soupers' - thick, poisonous fogs caused by the burning of coal for home heating and industry - claimed the lives of many people in the UK and USA, making pollution a political issue and resulting in the passing of the US Air Pollution control act in 1955 and the UK Clean Air Act in 1956. 

1960s and the development of anti-corporate campaign pressure

A decade later, in 1962, Rachel Carson's Silent Spring was published, which made explicit the effect of man-made pesticides on nature, and which made many more people aware of the connection between environmental degradation and corporate activity.  In the following decades, horrendous examples of corporate malfeasance took place, including buried chemical waste at Love Canal in New York, the Bhopal lethal gas leak in India, the Chernobyl nuclear disaster and the Exxon Valdez oil spill, serving to further underscore this connection. 

1970s and the rise of the NGOs

The 1970s saw the rise of non-governmental environmental groups, notably Greenpeace and Friends of the Earth, which, for the first time, developed campaigns that shifted the focus away from governments onto the corporate sector.   Greenpeace’s confrontation with Shell over the Brent Spar oil installation in the North Sea was emblematic of the kind of ‘David & Goliath’ battles that were then going on all around the world.  Other NGOs set the agenda for a broader range of rights- focused activities, including protecting the interests of workers, indigenous people, children and  animals, as well as every aspect of the natural world. NGOs today continue to make the pace on many of these issues, and continue to play an absolutely critical role in agitating for corporate responsibility and sustainability.

Economic liberalisation

Economic and social policy underwent a radical transformation in the wake of 1970s 'stagflation' - which was blamed on regulatory constraints, the power of the labour movement and stifling taxation systems.  Ronald Reagan and Margaret Thatcher enacted policies that supported more private enterprise, reduced labour power, freer markets and more incentives for private investment.

…and the exploitation of the poor

These principles were widely adopted by institutions such as the World Bank and the IMF, and came to be known as the 'Washington Consensus'. Countries seeking international assistance had to adopt these principles if they were to receive support from these institutions. Critics of trade liberalisation, such as Noam Chomsky, Tariq Ali, Susan George, and Naomi Klein, have always seen the Washington Consensus as the means by which less developed economies were opened up to exploitation by companies from more developed economies. 

Notable examples of corporate exploitation came to light in the 1990s, including the uncovering of the appalling conditions in factories manufacturing Nike garments, and the campaign against Cadbury in 2000 which was accused by the British Press of buying slave-farmed cocoa beans from West Africa. (This same accusation had been levelled at Cadbury in 1909 when the London Evening Standard accused the company of knowingly profiting from the widespread use of slaves on cocoa plantations in the Portuguese colony of Sao Tome!). Cadbury’s today has one of the best track records on a whole host of ethical and sustainable issues.

1980s: Mainstreaming CSR in management theory

And it wasn’t all bad at that time. In 1979, the chair of Tata Iron and Steel Company asked its Audit Committee to report on whether it had fulfilled its moral and social obligations - one of the first examples of social auditing. 1984 saw the publication of Edward Freeman's book – “Strategic Management: A Stakeholder Approach”, which is considered the point at which Corporate Social Responsibility became part of mainstream management theory.  Transparency and traceability in the supply chain became a more and more important concern at that time, especially with regard to labour rights, and a plethora of reporting standards now exist in an attempt to tackle these issues. 

1990s: Global business cooperation

The 1990s also saw much greater international cooperation between business and society to address sustainable development challenges. The World Business Council for Sustainable Development - a CEO-led global association of businesses - was founded at the time of the Earth Summit in Rio de Janeiro in 1992 to ensure that the business case for sustainable development was properly promoted.  Frameworks for understanding the relationship between economic, social and environmental health came to prominence, notably John Elkington's concept of the 'triple bottom line', and 'natural capitalism,' coined by Amory Lovins and Paul Hawkens.  Forum for the Future elaborated both of these to develop its Five Capitals Framework.  The UN Global Compact - a UN initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies, and report on their implementation was established in 2000.

Emerging certification and fair trading schemes

That period also saw the establishment of third-party certification schemes with the aim of promoting social and environmental goals.  The first Fairtrade label, Max Havelaar, was launched by Dutch development NGO Solidaridad in 1988, to ensure a fairer deal for disadvantaged farmers and workers in developing countries.  The Forestry Stewardship Council (established in 1990) and the Marine Stewardship Council (established in 1997) brought together businesses and NGOs to establish systems that recognised responsibly-managed forests and fisheries respectively.

2000s: cooperation and collaboration for sustainability

Since then, the pattern of collaboration between business and civil society (in the shape of an ever-widening number of NGOs) has grown and grown.  International ‘roundtables’ have been established,  attempting to mitigate the environmental destruction associated with key food commodities including palm oil, soy and beef. Businesses are increasingly working together on quite specific sustainability challenges, in a pre-competitive manner, to tackle systemic sustainability problems that can’t be solved alone.  Examples include  The Consumer Goods Forum, The Sustainability Consortium ,The Sustainable Food Lab, and targeted collaborative partnerships such as the Sustainable Shipping Initiative led by Forum for the Future.

Business takes sustainable development seriously

Leading companies now recognise that sustainability is strategically critical to their businesses.  Many are testing innovative new approaches in recognition of the fact that success is going to look very different in a low-carbon, resource-constrained world. Recent examples include Unilever’s Sustainable Living Plan (based on doubling the size of the company whilst halving the environmental footprint), Puma’s work on an environmental profit and loss account, M&S’s ‘Plan A’, Kingfisher’s ‘Net Positive’ strategy, and an equally impressive range of initiatives from US companies such as Nike, GE, WalMart, Levi Strauss and so on.

This is a fast-moving dynamic world – and part of the reason why it’s still possible to be reasonably optimistic about prospects for a more sustainable world.

December 2012

cadbury.JPG

The Cadburys were one of the first companies to develop CSR schemes in the 19th century

About the author

Cheltenham, UK

Jonathon Porritt, Co-Founder of Forum for the Future, is an eminent writer, broadcaster and commentator on sustainable development. ... (Read more)