Leading Sustainable Organizations
It is standard fare for large companies to talk about their contributions to society, but 2017 has provided new evidence that businesses may need to rethink their purpose in society. In just one month — September — the southern United States and Mexico were hit by three Category 4-plus hurricanes and at least two major earthquakes that devastated entire communities. Over 400 people died in two powerful quakes occurring 11 days apart in Mexico, while Puerto Rico faced the prospect of being without power and clean water for months in the aftermath of Hurricanes Irma and Maria (even as the U.S. was cleaning up after Hurricane Harvey, which hit Houston less than a week before Irma struck).
The following month, three more major events hit: Wildfires in California yielded a predicted $85 billion in losses, while Spain and Portugal similarly saw devastating blazes. Hurricane Ophelia left three Ireland residents dead, with hundreds of thousands lacking power.
As these catastrophic events increase in the coming years, business and government will need to work together — more than they have — to ensure that markets and communities are as resilient as possible.
Gray-haired execs might recoil at this thought, pointing to Milton Friedman’s oft-repeated claim that the one and only social responsibility of companies “is to increase profits.” But these managers ignore Friedman’s less well-known caveat, “so long as [the company] stays within the rules of the game.” As Friedman remarked in Capitalism and Freedom:
Government is essential both as a forum for determining the “rules of the game” and as an umpire to interpret and enforce the rules decided on. What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game.
This strong distinction between rule makers and game players is difficult to maintain when a changing natural environment becomes a destructive economic force that regularly puts populations of broken people on broken streets. Uninsured costs from these events are skyrocketing, placing a growing burden on households (