Johannesburg - Many companies fail to conduct business in a way the majority of their stakeholders would find socially responsible.
This was illustrated by the recent outcry following the revelation that international food producer Nestlé bought produce from Zimbabwean first lady Grace Mugabe's dairy farm.
According to Professor Viola Makin at Unisa's Graduate School of Business Leadership, it is the role of a company's board of directors, CEO and other stakeholders to monitor whether it operates in a socially responsible manner because "business is part of society and should be sensitive to the environment in which it operates".
"Social responsibility is a necessity because companies function within communities," said civil rights group Afriforum's spokesperson Kallie Kriel. He said companies do not only have a responsibility towards their shareholders, but also towards the communities in which they operate.
Shareholder activist Theo Botha said businesses also need responsible investors. Referring to the Nestlé scenario, he asked: "Where are the shareholders of Nestlé to ensure it acts in a responsible manner when operating in Africa?
"We need to see shareholders and fund managers being more proactive in driving the process of higher morals and good corporate governance," he said, adding that by neglecting this role, companies make profits at the expense of society and the environment.
According to Kriel, when companies and their investors fail to act in responsible ways, consumers should step into a watchdog role.
"In the ideal world all companies would voluntarily be socially responsible, but when that does not happen, consumers can play a very active role," he said.
"With enough support, consumers can be quite effective. We had 75 141 hits within 24 hours of starting the www.nestlebloodmilk.com website," said Kriel. The website has since been shut down.
However, said Makin, profitability directly affects the level of social responsibility; without profits a company cannot do anything.
She said different people and communities might have varying views about what's important, so businesses have to strike a balance.
From an economic perspective, companies "must do well to be able to do good", and the ultimate purpose of business is to provide goods and services for what society wants.
"I think there will be much more emphasis on sustainable frameworks and reporting about sustainability," said Makin. "Less than 50 years ago this was not a big deal in business, but now there is a great awareness of the 'triple bottom line', where the economic, social and environmental trends are key."
- Fin24.com